Skip to main content

Full text of "Industrial Development of the Netherlands Indies"

See other formats


INDUSTRIAL DEVELOPMENT 

OF THE 

NETHERLANDS INDIES 

by 


PETEF H. W. SITSEN 





BULLETINS 
of the 

NETHERLANDS AND NETHERLANDS 


INDIES COUNCIL 


of the 

INSTITUTE OF PACIFIC RELATIONS 


1. Towards Economic Democracy in the Nether¬ 
lands Indies, by Dr. G. H. C. Hart 

2. Industrial Development of the Netherlands 
Indies, by Peter H. W. Sitsen 

3. From Illiteracy to University, Educational 
Development in the Netherlands Indies, by 
Raden L. Djajadiningrat 


INDUSTRIAL DEVELOPMENT 
OF THE 

NETHERLANDS INDIES 

by 

PETER H. W. SITSEN 

Director of Industrial Division 
Department of Economic Affairs 
at Batavia 


BULLETIN 2 

OF THE NETHERLANDS AND NETHERLANDS INDIES 
COUNCIL OF THE INSTITUTE OF PACIFIC RELATIONS 



TABLE OF CONTENTS 


General Introduction. 1 

The Organic Structure of Secondary Industry. 14 

Industrial Policy of the Government. 29 

Factory Industry. 39 

Conclusion. 49 

Index of Tables. 63 

Index . 64 












CHAPTER I 


INTRODUCTION 

l'lom 1928 to 1939 the population of the Netherlands Indies increased 
ii cibout 60,000,000 to 70,000,000. On the principal island, Java, the popu- 
.iii reached a density of 1,360 persons per square mile of land under 
llvution. The continuous problem of feeding all these people caused 
1 1 anxiety. The difficulty was overcome partly by migration to uncul- 
Ited lands available in the Outer Islands where agricultural settlements 
|n established, and partly by irrigation, fertilization, and the distribu- 
i of selected seeds, etc. It seems that so far as food is concerned 
■. | -lete self-sufficiency has been reached for the time being. However, 

11 nous efforts will be necessary to maintain this equilibrium in the 
no. 

The figures in Table I indicate that this fortunate condition was achieved 
woen 1935 and 1939 at which time the demand for more industrial 
H1 1 icts increased suddenly and sharply. As is well known from the 
imy of the development of other lands, when the level of income is 
inasing the demand for food products becomes to a great degree in- 
mlic at the moment that self-sufficiency is reached. At the same moment 
■ demand for commodities begins to expand. We need not go further 
n the subject at this stage. It may be said that all indications of con- 
nption in the Netherlands Indies make it clear that between 1935 and 
I*l this point was reached. During these years we see an increasing 
turn of secondary products going into the villages of the Javanese 
nnlryside and to those of the Outer Islands. We see that gold, formerly 
investment in the Indonesian world for the purpose of raising one's 
iul standing, is parted with freely and used to provide the means of 
ducing secondary products. We see an independent industry increas- 
1 1 y develop from the existing mechanized industries which were 
morly largely dependent on export trade, and from the traditional small 
luge industries. 


1 




At the same time there was a remarkable expansion in inter-in It is clear that the people, formerly satisfied with a minimum of goods 
communications while changes also took place in the monetary fie] ich they produced and bought only when absolutely necessary, 


these years the growth of activity in the economic, financial, and 
cational fields which had earlier occurred only among the Indonesian 


dually demanded more and were therefore willing to exert themselves 
re, although their requirements were still modest. A new spirit has 


lectuals began to include larger groups of Indonesians as a result of 1 in born and its influence has become perceptible, 
instruction and improved communications. As I see it, there was a tu 
point in the social-economic life of the Netherlands Indies between 
and 1939. The index figures in Table I below support this point of view 


Table I 

Index-figures: 1928 = 100 


Years 


1 . 

2 . 

3. 

4. 

5. 

6 . 


Cost of living for worker's family with 

stable standard of living. 

Price level of food. 

Income from native agriculture exports in 

units of purchasing power (a) . 

Total exports in units of purchasing power 
Income from industry in units of pur- 


7. Total imports in units of purchasing power 

8. Consumption of primary foodstuffs in 


9. Calorie value of this food. 

10. Consumption of textiles in yards per 

person . 

Number of mechanically operated factories 


11 . 

12 . 


1928 

1932 

1935 

1939 

100 

106 

110 

118 

100 

65 

56.5 

57 

100 

51.5 

43.5 

44.5 

100 

52 

64 

88 

100 

59 

53 

87 

100 

165 

210 

335 

100 

61.5 

48 

90 

100 

102 

105 

112 



100 

110 

100 


92 

136 

100 

132 

134 

162 

100 

125 

139 

164 


(a) The purchasing power of the income for subsistence of a family with an income of about 360 
per annum was taken as unit of purchasing power. 


does not cover many years, is given below: 


Table I A 


Years 


1936 


1937 


1939 


Taxable wages, in millions of guilders. 493 

Electric power used in industries (index). 

Importation of capital goods (index). 100 


541 

100 

144 


620 

128 

144 


2 


he depression which brought suffering in more advanced countries 
)ugh the resulting unemployment, was also the cause of trouble in 
Netherlands Indies, as illustrated in Table I, because the standard of 
g of the Indonesian population had been principally influenced until 
n by the proceeds of the export trade. It may be said that agricultural 
luction provided the Indonesian population with crops for their nourish- 
it. while the proceeds from export-crops, cattle-breeding, fishing, mining 
in recent years more and more from industry, commerce and pro¬ 
ions determine the available margin for raising the standard of 
iare of large groups of the population above the subsistence level, 
isidering that the great majority of the rural Indonesian population 
o their own dwellings and land 1 , it is evident that with sufficient food 
clothing, which is naturally simple because of the climate, an in- 
ise in prosperity readily finds expression in the use of all sorts of 
v articles. For example, in two industrial organizations in the small 
ufjes of Japara and Pasoeroean in 1938 and 1940, respectively 285,000 
370,000 guilders 1 worth of furniture was manufactured for the domestic 
ket. The umbrella production in Tasikmalaja rose from 330,000 pieces 
1934 to 1,800,000 in 1940. The consumption of bread and biscuits—as 
nt from the basic diet of rice—grew by millions of kilograms; soap 
ufactured for domestic use reached a volume of over 80,000,000 kilo- 
ms in 1940. In nearly every desa 2 , no matter how small or how re- 
<>ly situated, the use of flashlights has become general. For these, about 
DUO batteries are manufactured daily in the Netherlands Indies. In 

f ... , r years, some 18,000,000 yards of tussore cloth were imported annually 

Other information of a similar nature, which, however, untortu * 1 _ . , 

wmer miuu mens clothes. At present one sees men everywhere m Java with 


»i;g jackets. The importation of tussore has just about held its own, 
in addition, there is now a home industry producing about 40,000,000 

In a year. 

I'lom these figures and from the index figures in Tables I and II, it is 
« evident to what degree industry in the Netherlands Indies has profited 


• I* housing situation in lava, whore two-thirds of the total population lives, can be estimated at 
i i 1 iiio.OOO Htono dwellings, ti.000,000 dwellings with tiled roofs and 2,500,000 with other types of 

i Iran (village* or hamlot), \n tin* runnllrmt unit of Indonesian society and consists of a group of 
ini'H with thi’ii (irroiiipmiyhiy tmiityards and cultivated holds. 


3 




































W1 II 




from the increased buying power attained by the rural population, 
increased prosperity, as I have shown, may be considered as the i 
rocal action between the greater profit for the Indonesian from pri: 
products on the one hand, and the growing desire of the populatio: 
more goods on the other hand; this action has strongly promoted i 
trialization. 

It may also be seen from the index figures in Table I that 
slight decrease in the value of total exports (line 6: from 100 to 97), 
affected principally the European-owned estates, the income of the 
nesian farmer increased (line 4) from 100 to 116. This increased pros 
of the Indonesian farmer was not diverted to increased imports, but fav 
the development of domestic industry, thus effecting a further inci 
in prosperity. Here a very large role is played by the development 
so-called Outer Islands. As an outcome of the establishment of agricu] 
centers in formerly uncultivated areas 8 , of the ever increasing 
the population in growing agricultural produce for export, of the dev 
ment and organization of mining industries, etc., a flow of indui 
articles found its way to the outer islands from densely populated Jav 


oached a further stage : an ever better distribution of industry has 
effected. In the Netherlands Indies we have not yet traveled so 
lihough the future certainly appears to lie in that direction. The time 
not be far when industrialization of certain districts of the Outer 
ii 8 is begun. 

order to define the place of industrial production in the whole 
nic scheme, it is desirable to give a rough general idea of the total 


o 


sha: • 


Table II 


EXPORTS 

OF INDUSTRIAL GOODS FROM 

TO THE OUTER ISLANDS 

JAVA 



Year 

1935 1936 1937 

1938 

1939 

1940 

Value in millions of guilders. 

. 34 40.1 64.1 

54.6 

58.6 

73.4 


This development of the relations between densely populated lave 
the Outer Islands parallels in miniature the development which 
place between the eastern states on the one hand and the souther: 
the western states of the United States on the other hand, during the 
period of America's industrial expansion, about the middle of the 
century. There also the chief products of the east were at first agricu] 
while industrial commodities were bought from Europe. Then, a 
agricultural development of the south and west gathered weight, the 
developed its own industry and became the supplier of industrial pro 
to those regions. Here the comparison ends. The United States at pr 


3. This native migration shows the following results: 
Years 


Aiou cultivated by thorn in hectares 
(1 hectare equals 2.471 acros). 


1936 

1937 

1938 

16,627 

19,307 

33,399 

18,004 

21,565 

20,071 


c l ion figures in the Netherlands Indies, as estimated during recent 


Combining the domestic market prices with the statistically known 
p iillural production, adding the value of slaughtered cattle, figuring 
ilue of the fish catch, so far as known, and calculating the value 
known exports of mining products, gives an idea of the value of 
iltural and mining production of the so-called primary industry. 
I lie data gathered in industrial statistics one can arrive at the amount 
illh which is added to the national income through machine industry, 
vor, we do not know the amount of earnings from commerce, pro- 
ii or capital. 

the basis of the census of 1930, the very rough test count held in 
md of available industrial statistics, the following estimate of the 
■ i of persons occupied in the professions may be considered fairly 
ilo. 


Table III 


ut Occupation 


Number Employed 


Im iul production, cattle raising, fishing, forestry, etc. 14,000,000 


ula industry 

• industry 
Industry . 


secondary industry 


2,500,000 

300,000 

600,000 


Total . 17,400,000 

M. m o, transportation, clerical work and piofoaslonn. 4,600,000 

Grand total . 22,000,000 

ninny to usago in many other atatiaticH, wointni aiu im Imltnl I*• .*'»n‘4 lit" agricultural work- 

.. tlioir main sourco of income is dorlvmi limn miin iillm*.*• I• ■ ln«i»"ling. Iiom investiga- 

i m 1940 and 1941 it appoara that there wan an nv.»i.i«j.. I ! wmlmi* pm lumily. The number 
• >• HI agriculture, ii only men aro counted, can he an .unu-.nlinatoly 10,500,000. 

• tound figures for production, ho fat on limy nu* known, indicate a 
m ome in UNO of about 2,500,000,000 < j 111 1«I«o • i Im llm 17,400,000 work- 
1 1 k 1 m Table IV Thin includes 450,000,000 guildum added to the 


5 


























income from industry. The rest of the workers performed all sorts < 
in commerce and gardening, the income of which is not known. I 
is the income of the 4,600,000 workers in trades and professions 1 
but it may be assumed that this group-as is true nearly all ov 
world—was able to obtain a higher income per person than th 
category of workers. 

As is shown above, industry in the Netherlands Indies has a 
become an important source of direct income. In addition to this 
contribution to the national income, Netherlands Indies industry a 
leased a not inconsiderable purchasing power, even with a rising 
ard of living, by producing cheaper articles than those previously im 
An illustration of this tendency is to be found in the decline of the 
of woven sarongs. This article of clothing was formerly imported, 
main part, but since 1935 has been manufactured in ever incr 
quantities in the Indies, until in 1940 with a perceptibly increase 
sumption, the domestic industry was able to supply the whole r 
Until 1938 the sales price of the domestic and of the imported artic 
practically identical, and the price fluctuated with the price index 
ported sarongs. The competition of the two products, which do no 
in quality, then became independent of the general index. Importei 
(dining the last years with losses) to retain the market, but ver 
imports dwindled to nothing. Graph A illustrates the story 4 . 

The average price of woven sarongs in 1936 was about 35 guild 
codi (20 pieces), while the annual consumption was 700,000 cod 
cause of reduced prices resulting from domestic production and 
sales by manufacturer to retailer, a consumer purchasing power oi 
10,000,000 guilders was released on this article alone, besides that < 
by the labor in that branch of production. 

Domestic industry also brought important advantages for the 
nesian population in another form. Although we have shown that i 
than one way additional purchasing power became available 
time between 1935 and 1939, there remained in the first place a : 
demand among the native population for cheap consumer goods 
an article as shoes, originally a commodity for the European colon 
generally imported, has become an increasingly used article in th 
nesian world dining the last ten years 5 . A domestic industry has dev 
from this demand and an article suitable to the native market in ( 


4. Taken from the "Economiach Woekblad", May 1941. 

5. Thi« in imperially important lrom a hygienic point of view. Hygienic propaganda has gre< 
lated tin* urn* o! nhooN aince chance* of infection, •■pecially from hookworm diaoase, aro thus d 

6 



O 

G 


G 

tO 

0 ) 


(0 

to 

G 


rv 

to 

G 


CD 

»0 

G 


7 






























































































































































and price is now manufactured in small and large industries. Graph I 
a picture of the price trend of imported and domestic articles. 

While imported footwear naturally followed the trend of the 
price level for secondary products the domestic output followe< 
of the domestic cost of living. This is a typical example of the v 
which domestic industry decreases Indonesian sensitivity to world 
for raw materials and to world commodity prices in western coi 
upon which the Indies formerly depended exclusively. 

The example of sarongs at once brings up the question as to w 
the development of domestic industry will not have an unfav 
influence on the volume of imports which can be roughly considei 
maintaining a balance of trade with the exports of raw materials 
subtracting the services rendered abroad. When the figures for 
trade as given in Table V are examined, such a development 
seem most unlikely, especially considering that in the period reprei 
in that table total world production increased 43% and total world 
increased 13%. It is probable that the collapse of world trade was c 
by the substitution in the industrial countries of autarky for special 
in products for which they are best fitted. 


Table IV 

MOVEMENT OF GOODS ON THE WORLD MARKET 
(Percentages on the basis of value) 

Imports of 1911-1913 

a. Raw materials and foodstuffs into industrial countries from industrial countries 18 

b. Manufactured goods into industrial countries from industrial countries. 12.3 

I. Exchange of Goods between Industrial Countries. 30.3 

c. Raw materials and foodstuffs into industrial countries from raw material 

countries . 26.5 

d. Manufactured goods into industrial countries from raw material countries. 1.5 

e. Raw materials into raw material countries from industrial countries. 7.2 

f. Manufactured goods into raw material countries from industrial countries. 21.3 

II. Exchange of Goods between Industrial Countries and Raw Material Countries 56.5 

g. Raw materials and foodstuffs into raw material countries from raw material 

countries .:. 10.5 

h. Manufactured goods into raw material countries from raw material countries 2.7 

III. Exchange of Goods Among Raw Material Countries. 13.2 

(a) Taken from a pamphlet by Dr. S. Korteweg at The Hague. 


With one reservation a number of factors would seem to indical 
in consequence of the industrial development of the Netherlands 


GRAPH B 


a 



9 




















































































even more purchasing power becomes available for imports. The 
vation I have in mind is that the industries in the Netherlands ! 
must be able to produce at a price level (which I call the Pacific 
level) in harmony with the buying power of the Indonesian consu 
This price level must be equal to or lower than the level of the co 
which exports the cheapest goods to the Indies without dumping or e 
aids. The reservation suggests that preferably only those articles s 
be manufactured for which the raw materials are to be found 
country itself or in which the labor factor is important. Thus it is prin 
low-priced and relatively bulky goods which enjoy a certain 
of natural protection in the island country. This situation will cor 
for the time being because of the unfavorable freight relations bet 
imports and exports.® These industries show sufficient profits so 
further investments will be possible at an early stage. 

One should give special attention to the fact that the advantag 
such an industrial development far exceed the directly perceptible a 
tages to the national income level. In the first place, the imm 
increase in the national income level can be compared to the firs 
which is formed when an object is dropped into a pool. This inf! 
is felt in ever widening circles. The same is true when new seco: 
industries are created in an agricultural country. The national in 
obtained directly from industries, forms ever widening rings of pros; 

It is certain that a good investment in Netherlands Indies 
creates more purchasing power than the total value of proa 
achieved by the investment, so that the value to be imported ini 
country must become steadily greater, although the articles ac 
imported may be of a different nature. This increase of imports into 
cultural lands such as the Netherlands Indies is of primary impoi 
for the future, and also for existing industrial countries. 6 7 Raisin 
national income by industrialization and thus raising the purchasing 
in agricultural countries, will do much to mitigate future unemplo; 
in the whole world. In addition to a better rate of exchange for th 
materials to be traded, a suitable industrialization of the raw m< 
countries will place these countries in a position to buy ever-incr< 
quantities of consumer and capital goods from the essentially ind 
countries. 

Statistical calculations demonstrate that in the years 1925 to 


6. Compared to 12,000,000 tons of exportB, imports amounted to about 2,100,000 tons in 
resulted in high shipping rates for imports to the Netherlands Indies. 

7. Soo Table V. 


mi|>lo, workers in industrial countries such as the United States and 
Hiit<tin had incomes respectively of 1,368 and 1,069 '"international 
•u irh per year, while workers in agrarian lands such as Finland, 
my, and Poland earned only 380, 359 and 352 international units 
inn I actively. 0 This suggests the likelihood that greater prosperity 
.1. tmnly populated country cannot be achieved without industrial 
• • 1 ’immt. This is corroborated by other evidence; the worker's income 
United States showed a steady rise from 1850 to 1925. Income in 
Mlinital units increased from 582 in 1850, 813 in 1880, 1161 in 1900 to 
1925. 10 And it becomes evident that industry is the lever to greater 
iiy when the incomes earned in primary and secondary production 
.. countries are compared. 11 


me 


Table V 

PURCHASING POWER OF AVERAGE INCOMES PER HEAD 
(International units) 

Primary Secondary 

Country Production Production 

U.8.A. 1935 . 688 1728 

Grant Britain 1930. 827 1151 

I’mnco 1930 . 500 1373 

lupnn 1934 .,. 146 959 

Jlwodon 1930 . 278 1109 

mum ii Izing the material presented above with regard to the Nether- 
lmlif»* # one may assume that some time between 1935 and 1939 the 
• imiched a stage of self-sufficiency for foodstuffs, and through 
mii.i 1 purchasing power, attained because the Indonesian population 
n 11 uli ud a larger share in the proceeds from the exportation of 
»liuinl products, the demand for secondary products was strongly 
I* 1 1ml Thus, conditions were favorable for a rapid development of 
ilmy industry. 

i ni*l advantage of this achievement, a rapid economic advance 
I In>ie seems reason to expect that the trend in industrial develop- 


1941 


luint national unit" is tho average purchasing power in the U. S. A. for primary necessities 

•.I $1.00 between 1925 and 1934. By a simple comparison of the money values of wages, 

i . .. etc. in certain countries with those In less developed countries, a helpful, though un- 

U •'"inrmcito, idea in obtained. Thun, Claik In his Conditions of Progress (Macmillan—1940) has 

* i ilull tho rupee in British India hnn an actual iiuichanlng power ratio of about 3 rupees to 1 

' • while tne exchange rate was 13.4 rupnnn t<> I jimiml Mm ling. For Japan ho figured the pur- 

i • ui.. at one yon an 14.1 pencil. Hough calrulatlnmi lot lh*« Nnthmlands Indies show that the 
•‘••i i"'Wo ol oiio guilder In lh»< I ml inn f r >i |<um pi<"lm • >. load, clothing, fuel, light and other com- 
>» oliout equal la that of $2.00 in the United Stains (Pages 3!i 30.) 

1 -i< filt., pages 4n 41 

id 1111111 facing pago I4H 

• t |mye 142. 


10 


n 










ment, the growth of which is evident from Tables I and II, can be A/1 mu one considers that this investment represents about 550 guilders 12 


tained in the future. 


w mlcing man, a figure which may be compared to about $4,500. in 
In consequence of the war various vested interests such as inter! Hulled States, it is clear that in order to reach greater prosperity in 

I J*'lhorlands Indies, considerable sums of money still have to be 
i*’(I The figures mentioned also explain how it happens that behind 
» worker in the Netherlands Indies there is an average of only 1.8 
• power available to provide for his needs, while for each American 
I here is available an average of about 40 horsepower. 


shipping, railway communications, etc. which had slowed dow 
economic development have disappeared so that in the future it v 
easier than before to replace obsolete organizations by those whi( 
more suitable to the economic life of the Netherlands Indies. It is 
worthy that the same decade which was marked by the upward 
in the line of economic development, showed an equally important t 
point in the social organization of the country. There was an impr 
expansion of education, coupled with the transfer of its managem 
autonomous councils, mostly with Indonesian majorities in control, tr 
of public health services to the same social-political institutions, fon 
of producers 1 unions for obtaining better distribution of income 
who collaborate in production, with here and there spontaneously 
ized social provisions for the workmen; there were savings in the 
nesian community, which have been invested in productive ve 
instead of in sterile gold, etc. 

This all seems conclusive evidence that in these years forces 
grown in the Netherlands Indies which will carry the land mor 
more rapidly to greater freedom and prosperity, 

For the students of Far Eastern economics, let me round off this 
duction with the results of a calculation of the capital invested 
Netherlands Indies. Naturally these figures must be considered al 
rough estimates since the statistical data in the Netherlands East 
are insufficient for an exact calculation. In many writings, howeve 
mates are found which summarize the interest and dividend infor 
and thus give the so-called commercial capital. The large sums in 
in irrigation works, highways and bridges, dwellings and harbor 
etc. are not included. In my calculations, since this is the intern 
usage, land values and national debts have not been included. The 
were as follows: 

Table VI 

Million gu 

Buildings . t- 200 

Communications . 1,55Q 

Commercial capital . 5,400 

Government enterprise . 1,600 

Balance not included in previous headings. 40(] 


TOTAL . KUSO 


(a) Of this amount, 900 million was Indonesian capital. 

12 


•— Iliu guildoi cannot I »•» lopionuntod (simply at itn into of exchange. 


13 












CHAPTER II 


THE ORGANIC STRUCTURE OF SECONDARY INDUSTRY 


For practical purposes the industrial field in the Netherlands 
can be divided into three main categories: _ . . , , . 

Cottage industry (m Dutch, huisvhjt ): the production of commoditi . y 3 

agricultural workers m their spare time 1 by the use of hand tool?" 
by which they add to their incomes. 

Small scale industry (kleinnijverheid): handicraft and workshop! 
less than, say, 50 workers, principally working with hand tools an< 
no important mechanical aids. 

Factory industry (fabrieksnijverheid): all further secondary prod 
with mechanical aids or with more than fifty laborers. Factory prod 
only includes those factories which are to a certain degree indepi 


an agricultural estate are considered as primary production in the h 
lands Indies. 

This division is thus affected principally along technical lines 
the basis used in the industrial statistics set up in the Netherlands 
in 1939. Nevertheless, these forms correspond closely, although not 
lutely, with the social structure. 

In the first place, cottage industry is practically entirely in the 
of the Indonesian farmer. The goods are produced, for the greates 
within the family circle. The major part of the production is trad 
members of the family in their own village; another part is bou< 
by buyers and sold in wider circles, or even in some cases expoi 
often happens that the raw materials are provided by a middlemc 
which case the finished article is delivered for payment of wages f 
work. 


. .. mm y named by the people in this branch of industry ia qmi« 

..1'* 1 ’ An examination of the budgets of 5,000,000 farmers in On 

I M ,, nliuwn I hat, from cottage industry, trade in these product* and 
h "," cultivation in their own gardens of the raw material!; »m..l 
|m ,! ""l “I industry, an average of 17% accrues to the budget.-'* 

• • "n! Investigation shows that this percentage has, in general, linmi 

• i« 1111 «mI Analyses of budgets, which have been published extensively 

• • ni year*, make it evident that about 10% of this 17% comen Jiom 

"" of cottage industry. On these grounds, the addition to th« 

■ •••I income from this industry may be estimated to be about 110,000,01)1) 

• a Production analyses have shown that about 20,000,000 guilder 
I materials for use in this branch of industry are imported each 


cottage industiy. Timm 

. ..y instances of cottage industry combining and collaboiatimi 

Minall scale industry and sometimes even with factory industiy. Tim. 

. .*Hon often developed new structures in cottage and small *ccil«’ 

•i'V which had certain advantages but which were often socially 

.cunlcally fatal as administered by the bakuls since the luiluil 

din m tod the work only wished to keep control of the whole situation 
Im " wn profit. Thus, in the textile industry, to maintain his key po*l 


1 xx x , . x v. -L , 1 would introduce inefficient methods of winding thread, to piovcmt 

units. Sugar refineries, tea and coffee factories, etc., which form p , 

. ^ A A __._from dealing with any other entrepreneurs. In Middin lava 


1. A work analysis of rice cultivation shows that 65 men and 44 women working 4 hours a 
cultivate 2.5 acres of rice-fields in one day. Thus there is a great deal of spare time available. Th« 
ownership per farmer is 1.6 acres. 

2. In Indonesian: bakul and tongkulak. 

u 


.. especially imported in a form not suited to tho loom* humq 

weavers could only buy yarns in a form they could us- 
d' 1 ' I'.ilculs who rewound the imported hanks. In this way he rotalm-d 

.I ’"ly of the trade and credits of the weavers altlioucjh yum 

i-uvu been imported in usable form. On tho othoi hand, tluv.u 
had the advantage of teaching the people that by division <>l 

. 1 collaboration there were possibilities of increased olllt ioncy 

.. way as on the assembly line in a modern factory. Thu lot 

• I oMimple demonstrates this combining and cooperating: 

"" lllllo villages grouped around Soekaboemi, a small town in W.-mI 
"limited in a prosperous agricultural district, a fuiily hupoilunt 
r industry existed, making agricultural implements for local im.» 
'••is, a small-scale industry dovolopod which extended Its |.iodin- 

... by making all kinds of cutlery. Here the hammering out ..I 

••ii . was done in small-scale industrial shops with from loin lu 

. 1 Invontlyallon (Mil Uni mil l.y lld.l<lcm| {'dolnmols In Ifiu 1 





I I If* 


ten workmen, while the handles, made from horn, bono, wood or toij 
shell, were made in the sphere of cottage industry. 

The knives were subsequently assembled in the shops and wertJ 
locally. The product could not be compared in quality to that which 
being imported from England, Belgium and Germany. However, onl 
more prosperous could afford to buy the better, imported article. 

Then through instruction and education consumers desired 
workmanship. Growing incomes stimulated this demand and this ei 
aged the workers in small-scale industry to greater efforts. A numl 
small-scale shops negotiated for closer cooperation and within a c 
of years they organized some 1,200 workers into a so-called indt 
central or cooperative. 4 

This industrial central built a finishing plant for the joint accoi 
its members, in which the most skilled workers from various small 
workshops were brought together and where, also for their joint ac< 
polishing machines, boring machines, tempering furnaces, equipme 
nickel and chromium-plating, etc. were installed. The workshops 
were cooperating with the industrial central pledged themselves to br 
every week a specified amount of work, such as blades, with the he 
made in cottage industry. These semi-finished products were made fro] 
terials and models furnished by the central; they were delivered to th 
tral for a reasonable price, jointly decided upon by the members. 

At the time of delivery to the central the objects were inspected for 
ity and form. Badly made pieces were handed back to the shops for im] 
ment, the approved ones finished and assembled, then packed and s 
dealers. It was an accepted principle that profits should be shared a 
the workshops according to the quantity of goods they had delivered, 
the elected management of the central exercises a certain authority in 
ing the uses to which the money shall be put. In principle, it was agree 
part of the profits was to be spent on better tools for improving the affi 
small-scale shops. 

Thus we see the development of a form of industry by which the In 
sians have established a business as complex as that of a big facto; 
combining the cottage, the small-scale and factory industries. 

This example introduces the second form of secondary industry, i.e. 
scale industry. In this branch there are many and varied centrals 
nature described above. There is the weaving industry, where wi; 


4. It is noteworthy that in the same period also agricultural centrals were created: tapioca 
vegetable oil centrals, etc. 


i WMi.liinq and Hewing lalco place in cottago Industry, whilo shearing 
*n..| urn done m small scale or factory industry. In the batik in- 
•“•..im stages of preparations are allocated to cottage industry. In 
"""• • i "luiili y, the manufacturing of the composite parts is given to 
.d .hops by the main factory, while the finishing and the sales 

• • tIn«>tt<|li the centrals. In the pottery industry the molding and 

d.. small-scale industry, and the glazing, packing and shipping 

»hi..n.|h tlm central. 

“» of small-scale industry resulting from this system has been 
h*. This is especially to be ascribed to the form which is com- 
Muii.ihln to the mentality and nature of the population. A little ex- 
*m»m <■ neia 1 economic territory will call attention to two important 

..which undoubtedly have influenced the growth and form of 

f • ‘ i " « lolly small-scale industry. First is the sense of obligation to 
duo/ o \'.t:;tance, a conception which has penetrated Indonesian com¬ 
bi" 'iud by which every communal relationship, whether to society 

• * i individuals is determined. The second phenomenon relates to the 

•• • in mm os of slack periods in the cycle of consumption which has 
... and two peaks each year closely connected with the harvest 


ill 


i mm II.. I mi vest is sold and the farmer has money in his pocket is the 
•' !•'. I • 11 y m new clothes and tools. It is the period of courtship and mar- 
Mnd llim of festivities with purchase of delicacies and the organization 
"l .Hid dances. 


* nUh,«ilion to give assistance, called sambatan or sambat-sinambat 

♦ •’lulling to the community and toeloeng menoeloeng when referring 

villagers has had a very favorable influence on the results of the 
indiiiiiiic.il centrals. So long as the cottage and small-scale industries 

..luring only for the needs of their own communities the ingrained 

i • •! obligation to be helpful to that community and to its members 
d il" bost quality possible to be delivered and insured that the re- 
diclos were ready on time. Later, when buyers outside the village 
i "mImis the situation changed and it was often very difficult to get 

• i. u on time. Anyone who was ordering such goods about fifteen or 
V"<iia ago knows the usual outcome. Never on time, not what one had 

d | »oor form and finish, poor materials, etc.—these were the things for 
iIh. Indonesian craftsman was reproached. Only the shrewd bakuls 

• im mi) were able to obtain a certain position in this village production 

♦ I mg umple credit or advances in times when the workers could best 


16 


17 






use money. The result of this was that intolerable social conditions! <m work from its stocks, it can maintain an even level of produc- 

existed which have disappeared with the growth of the centrals. The I.i «!»•■ whole year and in this way keep production costs at a fixed 

lishment of the centrals which were often directed by an Indonesian If n -v..., when the product is perishable, e.g. cigarettes or biscuits, 

craft teacher 5 and the best educated of village craftsmen - men! .. H .pendent on the vagaries of fashion, e.g. striped sarongs, 

sometimes went to the city, read the newspapers, in short, people 4 .the machine industry is often unable to hold its own against 

vision was extended beyond the boundaries of the village-removed I.. from Indonesian hand production in the face of very great 

of the other social and technical shortcomings. The small-scale wol .1 I lu.t nations in consumption and sales possibilities. 

united in a central, realized that they had assumed an obligation towel .. 1 .1 v, (from December to April a monthly average of not more than 

finishing plant. They have begun to see this finishing industry as a 4 " •<> four million meters of batik goods is sold while from June to 

their community and therefore they feel obliged to do good work andi ' . . Urn. average is between twelve million and fourteen million 

early deliveries. The following little episode will explain the new sel .. of all sorts of necessities except primary essentials more or 

obligation better than many statements. I 11 . »ame. trend. Consequently, the industries which are obliged 

Once when I visited one of the central smithies, the master blacS ,• 11 m u work according to this seasonal fluctuation have often 

with much pride exhibited his tools: new files, a drill, an anvil, etc. Bil 1 r «’'-lal systems. The machine weaving industry is a typical ex¬ 

still more pleasure he showed me his beautiful, shiny gasoline lamps! ' 1 liml thoso factories produced only woven sarongs, multicolored in 
he had hung in the smithy "to be able to work by night too." NatuA. 1 potentially a very profitable article. But this article is strongly 
told him they were beautiful, they were, in fact, but I expressed surpril.in. color and design by fashion and can be made by competitors 

he was going to take on night work, a surprise which is understandable! ..Inna and hand looms. With the development of the latter a 

I explain that in this industry one seldom works more than an average* .... .. between the machine and hand loom business in which the 

to seven hours a day. He hastened to assure me that they were certaiJ.. certainly have lost out had it not taken up plain fabrics in 

going to work every night, but he said, "You know that we have to |. ..ml., it again possible to compete. Through this change in their pro- 

many celebrations in the village, for the harvest, for births, marl , • ... they were able to meet market demands and keep their 

deaths, etc. Because of this we often lose much time. It might hapl I .1 plain weaving during each slump, since this naturally did 

there were many such festivities, our production would become so! 1 ■ lb" influence of fashion trends. 

that our finishing factory would have no work. We can't let them do*, ..| industry is often also influenced by the same circumstances, 

in such cases," he said with a sigh, "we shall have to endure suchl, .. I acture of a certain type of hand-wrapped cigarettes. Instead 

work." This statement proved to me that he considered the finishing a , those cigarettes are wrapped in the thin leaf of corn which 

communal possession, even though it was situated in another villagi .| || 10 corn stalk, while their filling consists of tobacco mixed 

sambatan obligation was the binding element in this case. It was ia .1 which finely ground cloves is the main ingredient. These 

regaining of lost income which regulated his conduct, but the obligal.... .xlremely popular with the native population, both for their 

the community to which he belonged. I.I flavor and for the crackling noise made by the clove grains as 

The second influence, the influence of the rise and fall in consump*. . 1 ...... I lie heat and free their aromatic oils. Their cost is about 

small-scale industry, is of an entirely different nature. It is of vital impel .. -n I. 

in those forms of production which emanate from mechanically orgl . ,1 ,|.production in this industry amounted to about 19,000,000 
ventures with fairly high fixed overhead costs, and those under Indol PI4II. Ilowcvor, in the periods of slump not more than 1,000,000 
control with very low fixed costs. When the former is obliged to linl wore sold por month, while* the domand increased by about 

duction, the production costs per unit rise very steeply; when the lattea .,, mnnlhn of prosperity. Thou© eupnoUon cannot be kept for more 
production, however, such a rise does not occur. If a mechanically orgl . , ■!< fl without dolor ioratincp 

- I i ilil then© wore G9 factories producing then© cigarettes, employing 

5 . For further dotailw on Iheao toachora noo Chapter III. 



new production. In 1930 lb, „ ere ^94 0M Ch' eSPSCi ° lly 
industrial workers or 4 7% T n ~ * 94 '°°° Clunese amon g ‘he 2,21 

=..« , h p s“c,o“r ht, r on trr 9M “° iiy 

careless production, neglect of time Iimlte, etc. ° W Phe ”° 

succeeded in obt^gZZtT^lmall Ihop! 1^' Q 

there were repeated demrrnHa f ©ople s Council (Volk; 

■or to those 2SS^^T?T “ C ° n ' r01 ■*“> 

SS?=iS 

sr s*: r ”- smo11 ;x: 

~f^t=o“o^r b ^r 

age ,her,r;tir y sn,a “ factories were run ** ^ 


Imd insufficient knowledge of the trade had to sell out to the highest 
lift Among Indonesians there were not enough capable interested par- 
A llliough the Chinese were not seriously interested in industrial develop- 
(•* 111 '(finally, there were many who now became interested. 

I\n investigation made in one of the most important weaving centers, 
<l|Hluja, a village near Bandoeng showed that about 335 of the total of 
iciimately 1,500 large and small businesses passed from Indonesian to 
■m mu hands in 1939. In 1940 this number was 35. This is a clear indication 
I wn have here a case of economic readjustment. As soon as they realized 
' dim field of enterprise did not suit them the less capable producers sold 
" i n lories. When there were no Indonesian purchasers these sales were 
I* lo Chinese. These transfers were therefore due to special circum- 
*' an d consequently it was not a question of racial penetration. On the 
" l ,nn< i an opposite movement occurred in many of the older industries 
llif mime period. In Djokjakarta and Solo the Chinese batik producers were 
l nil pushed out by the Indonesian contractors as in Pekalongan also. 7 
"ii.|uestionably the Chinese dealer has always had an important place 

..11 scale industry. For this there are historical reasons. At an earlier 

I Ihe occupation of merchant was definitely not valued in Javanese 
film In the closely woven village relationships the merchant had no place, 

H llii' Javanese intellectual considered trade as an inferior activity. 

• I'lnlosophy of the Indonesians made it easy for the Chinese to take a 
i important place in the Indonesian economic world. They became the 
|*iii of products as well as the distributors and collectors for the European 
li "im. They also filled the role of distributor for the importer. About 20 

. .. ‘bis business was practically entirely in Chinese hands. But in the 

. 7 ears great changes have taken place. More and more the Indo- 

"i is reserving certain parts of commercial service for himself and 

. I ou * ‘be Chinese from them. This is also true in the case of secondary 

I.'y- As a typical example I mention the fact that the batik industry 

i 1 ’ 1 U P nearly all the textile raw materials through the Chinese middle- 
llowever, when the batik centrals were organized, the Indonesian 
' "i"'-’*, buying large quantities as the Chinese did, made agreements 
Hy with the importers, often for prices specified in advance by the pur- 
h Y a sort of first refusal contract. Thus they obtained a considerable 
*■' ilmi in the cost of the final product and proved in their negotiations to 
" ''lear understanding of modern business. 

i i •'•member that a few years ago one of the directors of the Indonesian 

in Ml r,0% ill Ilia wlioln I,"Ilk Imlimlry In ooncnnlralail In D|ok|akarta, Solo, nml Paknlnngnn. 


21 


batik central in Solo" told m „ chin.*, ^ estabUs 

which were nearly alwayt. auxiliary to the main business of being n 
men, had decided to close down. It in noteworthy that he had promi 
uy larger quantities of native auxilia.y material such as charcoc 
peanut oil from these former business rivals and to give them prefi 
for the local distribution of batik. "You see," he said to me, "these 
have worked in our line for dozens of years; formerly they gave credl 
help m difficult times to many of our men who had small businesses 5 
sure, sometimes they also competed unfairly with us, but still, to a c« 
extent they belong on our side. Now that we have grown strong throuc 
cooperation, and they have not been able to keep their business goi 
competition with us, we feel obliged to support them in their trade." H 
a broader connechon-a connection which the intelligent director of th< 
central understood-was an expression of the modernized sambatan i 
is typical that the capitalistically minded buyer of small weaving fa, 
considers he has fully carried out his obligations by the payment 
agreed sum of money, while this Indonesian director feels it as an 
ion, when any action on his part causes changes in the life of th 
mumty, to take the consequences upon himself, or to mitigate them. A1 
will certainly not say that every Indonesian intellectual is as imbu< 
the spirit of the sambatan obligation as this director was, it is a fact ft 
relation between employer and employee in Indonesian organizati, 
different from that found in the majority of Chinese and European ind, 
enever great profits are made in a European business, the manag 
comparatively generous shares of it. even greater shares go to the 
or stockholders and m general the workers are but modestly compe 
much more flexible arrangement exists in Indonesian business co: 
because of the sambatan. Wages, as well as the size and kind of gif 
the contractor to his workers at the time of the annual celebrations, wee 
., rise an fall much more elastically in general, according to Indo: 
business conditions. Since the Indonesian considers this system to b< 
just_ there are seldom difficulties with the workers in Indonesian ente] 
The extent of small-scale industry can best be measured by the ni 
of persons employed. Of the estimated total of about 2,800,000 work 
secondary industry, there are about 2,500,000 in small-scale indusi 
whom about 2,400,000 are Indonesians. The other workers are most! 
nese. mong the 2,400,000 Indonesian workers, according to an es 
made in 1939 from a very incomplete test count, there are about 6 


blneci 'urnovor ol abouMO 0 ^ 1941 of 289 balik MlnblUhiM.nl. whirl, had] 

22 


ion workers. The majority of these worked in small shops, either built 
in the home of the owner of the business, or built on his land. An incom- 
and rather general investigation made in 1937 indicates that probably 
lo 45% of the total number of workers lived in villages. Beside these, 
a, is a group called bakul-workers, probably about 40% of the total, who 
I their products either wholly or principally to middlemen, while 15 to 
work in hand operated factories with less than 50 workmen. These 
L named concerns often also buy up the products of the bakul-workers. 
|* uxjards the types of production, the following table gives data from the 
Lius of 1930 and from the general investigation of 1937. 

Table VII 

PERCENTAGE OF WORKERS IN SMALL-SCALE INDUSTRY 


i* »t of Industry 


Village 

Production 


Bakul 

Workers 


clothing, leather . ^1.5 

ui ind table luxuries . 48,5 

_ 3 

pM-ilwork ... 

. 3 


48 

31 

5 


Factory 

Workers 

73 

22 


. 

» -llunoous 
I fnlal . 


6 

100 


100 


100 


I 1 inly the factory workers can be considered as actual wage earners, 
11 ,ill, all the other workers may be considered principally as share-holders 
k II... business, both with respect to the means of production and to the 
PH. modifies manufactured. Both among the middlemen and among the 
of the hand operated plants there are Javanese and Chinese foremen 


IlMIB 


__ _ L1C1C UXC juvuux^civ -- 

K,, cire completely capitalistic in outlook. Unfortunately data about the 
i»<l«>rtion between the number of businesses conducted and owned by 
Li- tiosians and by Chinese are not available. 

Ihn middleman, generally called bakul, more profit- than community- 
has repeatedly taken advantage of the opposite mentality of the 
pitiimKian producer. Such cases arouse serious dissatisfaction in Indonesian 
|}Mlur:tual circles. The most extreme complications and machinations which 
■»*« cmd in which the Indonesian workers came off very badly, sometimes 
Kthictd insoluble. The following diagram, illustrating the complexity of 
Em... i olationships, applies specifically to the situation encountered in the 
u...|o textile industry in Central Java, where a thorough investigation was 
Hh.I.. hi 1936. 


23 


















DIAGRAM OFTHI < III IA< I II 


XIII I INDU/rp 


CON/UMER 



* 


CON/UMER 

via baz^arI 


/mall 

f*J A Jla a 


BAKU L/ 




BAKU!/ 


BAKU1/I 

I 

PEV/INDf R/ 


V/HOLE/ALER 


I 

* 


IMPORTER/OF yARN>AND D/E/TUFF/ 


HONEy ADVANCE/' 
YARN / 


•- FfNIZ-HED PRODUCT 


As may be seen from the above, the bakuls placed themselves between 
pw materials—via the cottage industry-and consumer. They knew how to 
Lin a powerful position by offering advances in credit, and especially 
i* uplifting up the work. I call special attention to the latter because t e 
pitlustrial centrals also followed this system of dividing up work, but with 
Lllo other intentions. The bakuls operated with the plan of keeping t e 
tinkers dependent on them to increase their own earnings to the limit at 
1, expense of the workers. The centrals on the other hand operate in order 
K maintain the quality of the work, and to improve the social-economic 
►mltion of the workers and of the village. In the latter system, the earnings 
La the industry were shared as evenly as possible; in the former there 
a very uneven distribution of earnings. The previously mentioned in¬ 
stigation in 1936 in Central Java and an investigation made at the same 

..into the abuses in the furniture industry in Eastern Java, demonstrated 

| Ml not less than 70% and 50% respectively of the earned mcome-i.e. 
|*.K| 0 S plus profits-went to the bakuls as pay for their management. That 
Luc shrewd fellows were able to accomplish this, and that the popula- 
Li accepted the situation, must be ascribed to the social position occupied 
u the bakul in rural districts. In general they are the most advanced, they 
*„.w the outside world-but in addition, they know every characteristic o 
village; for the building of new homes, at weddings, births and funerals, 
L hakul is ready with advice and help (the latter especially in the form of 
ELy advances to be paid off later in delivered products), to stand by the 
nkers dependent on him. He can do this without too great a risk because 
L knows the people thoroughly. It is remarkable that in the modern relation¬ 
's of the industrial central these same good qualities of the bakul are also 
■Itlzed. The workers in the central always have a credit account m the 
■lulling business, against which they may draw in exceptional circum- 
»■ inces. The setup of the management and the workers in the finishing fac- 
hy, who both come from the cottage and small-scale industry, guarantees 
Ik very necessary knowledge of details concerning the personnel. I am 

.ioughly convinced that this form- which has developed in the last six or 

(, v «n years as a result of the growth of education and travel facilities-will 
Ly an important role in the future of the industrial development of the 
•iHilmrlands Indies. 

In order to round out the picture of small-scale industry, I may add some 
i..i,ills concerning the working day and wages. From the data (Publication 
in nl the N. E. I. Office of Labor, 1935) gathered from 1931 to 1935 on con- 
,ltli, ms in the hand-operated cigarette industry, which was then entirely, and 

25 


I • "I i 


24 






























that in Central JuX’I'Xun ."'j’ ,,lfl « may b 

23,170 in mctnufactuxinq it,Utmi.v , i "" I 11 ’ <>y< ' d ln cotta g e industi 

13.420 , especlivcly A 1 .. <••«. 'he figures are 6.71 

average of „o, more mT* . “**** W °‘ h 

was very prevalent in .. ' " " yoar ' Absenteeism fro: 

300 small weaving establ,. l„ " "" An investigation undertd 

ter of Madjalaja on Javi^ uhowilTi] ' V "i '“''v'ously mentioned weavim 

The following may be said r,<r , " 0 ' more than 6.4 hours a 

as they are controlled by bakuhTthe 9 In co «age industries, L 

relationship to the bakul gives a loaica| WCU, i , ; ' UnbeIievabI y smal 

call the pay a wage. In fact it is m -''T UMClllon for this - °ne can hj 
Although the wages are also W X" ^ T" *"*”**“• « 
tion with the centrals thev rm= k . cottage industry is in coi 

in farming. In ^ With "hat may be , 

tom oTm ' he di "“ em d ~es of J2y better. », 

m Arming districts where there 1 J ° g ® S ° r sma11 to ™s, in other 

The new forms which wX f t6nds to ^*1 

tries justify our expectation that a new ? ^ ^ yearS in these f* 

East Indies, with much £eate enZsZ 7 ** Neth ^ 

insight.ro 5 enthusiasm for work and with econo* 

with more than S^rk^has 1 ^ 11811 ^^ 0101168 ° r non - m echanized p|„, 
of industry which iaU^Z ^ 9 " atty - In 1939 -any brc^J 
‘he Netherlands Indies ^maia^ 9 X 

‘hey are not finishing plants workina SetUP . ° f these facto: 

industry, are practically entirely we^ C ° 0peratlon With small-scale a 
ferentiation of forms, so tvni^i L -JlT' Ca P ltaUstic in organizatio: 


Lm they are cheapest; the sale is to the highest bidder. The extent of the 
Modes is extremely varied. The number of workers per factory varies 
jlwron twenty and 4000 or 5000. 

Tho development of this type of industry also demonstrates the turn- 
| point in economic expansion between 1935 and 1939. Secondary 
(luslry until then always originated as servant to agricultural industry, 
i normal consumer goods for the worker were at that time imported 
I-induced by handicraft. As soon as agriculture became mechanical, 11 
I jfopair shops came into existence. At a time when exports of agri- 
n < il products to other parts of the world were growing, dry-docks and 
|l*yards became necessary. Slowly a tool industry developed, supplying 
Culture, shipping and handicraft. Following this, the workers' needs 
• nnsumer goods grew so fast that they could no longer be supplied 
handicraft; the volume of demands had then grown so large that it 
I^Hiue profitable to fill them from local mechanized production. It should 
are noted that this point appears to have been reached in the Netherlands 

i T VQried/rUnfi l ton about 1935. Within about five years, the number of workers in 

I'uy industry was tripled; next to the old established ventures such as 
ibly-industries, ship-yards, etc., there was a large expansion of the 
modify industry; the number of electric power-stations grew from 299 
i Ml; the number of large weaving mills grew from 9 to 67, and about 
1 »lher factories were established. 

i'wo forms of industrial development which were to become important 
the Netherlands Indies came into existence at this time: the overseas 
!•»!/ and the managing agency. 

I'he first, a factory set up as a subsidiary or built on the experience of 
iilur factories in highly industrialized countries, is of great importance 
(liture development. The Goodyear tire factory, the Lever and van den 
ill’s margarine and soap factories; the great paper mills, the General 


new industries, whfl| 


dence; the structure fesimpleMht indUStry ' iS not much 4 

- of 

26 


■hinm plant, the breweries, the Bata shoe factories, several large weaving 
pi - pinning mills are typical examples. These are in general large fac- 
Bina, set up in the Indies with capital and management from a distant, 
■iMy industrialized country, and to which new ideas are constantly 
pHiinq from the mother factory in the land of origin—ideas which embody 
ft i *’Suits of research, or which are brought by new personnel when the 
■ •"»y is expanded or when there are replacements. This setup appears 

L •• In Iho Netherlands Indios the sugar industry with its extensive mechanical refineries greatly 
^ " • -I Iho establishment of assembly industries. When the sugar industry was reduced to half its 

nlzn in 1932, tho Government had to take stops to prevent the simultaneous collapse of those 
Hu* h.ii y Industries, 


27 











to be very efficient and attractive for backward countries. In these 
tries real scientific and technological knowledge is expensive. Peopl 
the required education are comparatively few in number. In the mol! 
country well organized and well run research institutions are genefl 
available, as well as large groups of experienced engineers. The airph 
has brought the world closer together; thus close contact with the motli* 
land can be maintained. This is the best form of "white man's Joi 
provided there is no exploitation of the worker and endeavors are me 
to pass on to the Indonesians as much experience and knowledge s| 
possible. 

The other development, the managing agency, does not impress ^ 
so favorably, especially in the form in which it has grown up in the IndU 
during the last five years. When factories came into existence, furnisjjh 
many commodities which had formerly been imported, the importeri 
these goods became to a certain extent superfluous. Since the impafc 
was generally also the wholesale dealer and thus in possession of a 
organized distribution system, it was logical that the manufacturers, 
in the beginning had enough worries, gladly turned over the sale of 
articles to a middleman, i. e. in this case the former importer. Sin 
import business often was at the same time a department store, it 
in many cases a very efficient plan. This cooperation, which wi 
tainly not fundamentally unacceptable, reached a point, however, w 
many industries were tempted to too rapid expansion, for which | 
obtained financial facilities from the importers. These importers therWj 
acquired the exclusive rights for the furnishing of machinery and fft 
materials, as well as for the sale of the products. The importer becdH 
the managing agent for the factory. This arrangement has in some con* 
led to complete subordination of the manufacturer to the import*!* 
situation which is certainly not conducive to a healthy development j| 
industry. 

Statistics have been assembled since 1939 in the Indies for a numljl 
of branches of factory industry. In these branches of industry there wf) 
5,469 factories with 324,210 workers in 1940. The distribution of factort* 
to cover the whole field of commodities, and the stage of developmi) 
already reached, are most important. But before passing on to this, I nliM- 
first survey the methods by which the very rapid industrial expansion 
the last years has been directed and advanced. 


28 


CHAPTER HI 

industrial policy of the government 

In every economic devdopmer^ clearly 

, pace. The following table, which refers to tne u 

Wonstrates this trend. 

Table VIII (a) 


htiq.. mining and J 
Llltuce, excl. rents.. 


MAI. ... 
| units , 


Occupied 

Millions 

Same, less 

unemployed 

INCOME 

Dollars per 

Billions person engaged 

of dollars m industry 

Income I.U. 
per person 
in work 
on 48 hour 
week basis 

4.97 
,. 1.35 

1.38 

4.97 

1.20 

1.23 

0.765 

0.457 

0.992 

154 

381 

807 

298 

737 

1561 

.. ~Z 

7.39 

7.39 

2.214 

2.385 

299 

323 

579 

625 


■ i fonts. . 

ki. 

^L|1 culture .. -igoc 

. mining and building. u ad 

Hjiuitco, excl. rents. 

IthTAI . 

Hfc) fonts. 

||«IL 

A-.. Culture ... 

mining and building., 
excl. rents. 

MM.••••■ 

I It.> I .. 


‘lift! 

. 6.90 

6.90 

2.72 

2.80 

1.78 

1 7^ 

259 

643 

354 

878 

mining and building. 

2.92 

3.10 

l./U 

3.19 

1139 

1558 

ml Mice, excl. IfcJma . 


12.42 

12.42 

6.72 

7.18 

540 

576 

739 

787 

HKin 

.. 10.70 

10.7 

7.6 

8.7 

3.69 

t 71 

345 

752 

624 

1361 

| ||i titiii , mining and building.... 

.. 8.45 

.. 9.92 

8.56 

984 

1780 

■lllltfCO, eXCI. .. 


27.0 

27.0 

17.96 

19.36 

665 

716 

1203 

1293 


11.1 

13.0 

15.6 

9.0 

22.1 

36.9 

810 

1701 

2366 

625 

1313 

1828 

39.7 

39.7 

68.0 

72.4 

1712 

1822 

1322 

1406 

10.5 

11.9 

19.95 

4.70 

13.4 

3.9 

448 

1127 

1599 

669 

1683 

2390 

41.35 

41.35 

50.0 

53.0 

1210 

1282 

1809 

1917 


, n„,k: Tim CondlHo»« .. Proqfn. l>ug» 


340. 


29 










































































worker derived fern^ ^ deVd ° Pm,mt «» i-com, 

Pa,tera - The increased industry itsel, M 

^ prod - 

«*ur s yeora ■- 


Table IX 

...^ (From % up es in Table VIII) 

Year ME W WTERNATIONAL UNITS (Billions) 

CS"*—. »» *» 

1,48 2 - 4 5 6.70 


r—uiy production 

Total* 6 secondary p^uctionl”!;;;;;;;;;;;;;*’ 


0.88 

2.33 


2.38 

4.85 


10.35 

17.05 


1920 

6.90 

17.20 

24.10 


r ru , 0 17.05 24.10 

fa™ P^?;r„^Tn^r", ,sso and 1935 a ° 

Xrr:?:: sto9e ,he -l 

ppZ1 s °ro b ” 

O Nethertads Indies some time b^T°Z‘° T"" h TO 

,. 

tura^ exno t ^ V ® ry unfav °rable basis of i, increasm 9 P°pu!all,* 

i=r-' rS,“~r “--HSrl 

The rUbber P-ce 2 w a a n s d oi 9 a 3 s 9 o'teS A was 0 63 0 ,» , 

30 ' 0 315 guilders ^lv.,„ p J V 


l*w(trd the appreciation of prosperity in terms of commodities and the 
l*'nis of acquiring such commodities. 

An increased total income from agriculture cannot absorb all sorts 
1 produced or imported commodities and consumer goods unless this 
ttt'oine is distributed as well as possible among the workers, thus raising 

purchasing power of the individual farmer. 

In order to attain this, the acreage under cultivation was extended 
•‘••.High migration, so that the poorest farmer from Java became a more 
Bilperous one in the Outer Islands. Individual production was increased 
'"••ugh irrigation, distribution of higher yielding seeds, and through edu- 
Pllon. By the formation of agricultural cooperatives and funds the Indo- 
luman farmer was enabled to obtain greater profits from the generally 
'pllrr paid export crops. Furthermore, the burden of land taxes which 
■ilghed on the farmer's income, was reduced and credit facilities were 
Ini* iblished for the rural population. Where onerous debt relations existed, 
<l "‘ Government established means of combatting chronic indebtedness. 
|y fixing the commercial price of rice at a higher level, more in con- 
P mit y with the general index figure, a wider spread was given to the 
•"•imented farm income. 

It is easy to see that resistance was often encountered from the plan- 
Mlon (estate) owners against this state of affairs, which was being strongly 
Emulated by the Government in order to give the Indonesian farmer a 
‘•"lor share in the raising of export crops and in the profits resulting 
1‘twofrom. The Government, however, won more and more followers so 
HmI some time between 1935 and 1939 a majority was formed in the 
pnple's Council who backed the Government policy. After that, in spite 
1 llio difficult times, the material foundation was laid in an ever-quickening 
* u,,, po for the possibilities of industrial development. 

I I he desire of the Indonesians for new and more numerous com- 
"lilies has been a special stimulus to industrial development. In order 
** ‘ ^courage this desire in wider circles, several methods have been used. 
ilm> of the most efficient propaganda methods in this was the organization 
l ninall and frequently varied exhibitions of all sorts of commodities 
- l m 1 in rural districts. These exhibitions were often held in schoolhouses 
‘•ii the home of the teacher. The use of these articles was demonstrated 
. i he teacher in the schools. The children spoke at home about what 
•‘ y had seen: shoes, forks and knives, flashlights, bags and trunks, 
>»>• I Hollas, etc. The older folks went to see what "teacher" had, and learned 
Iml comfort and pleasure these new things could procure. 


31 










At fhe 


, 801130 fim© rv. 

.. ' *** -• io^ ^f e " °PPor*ual«f 

i ordw '»<^rr:^ •* «s *:-! 


i 


If is natural that J ~T‘“’ U ' at * a,ld «oll (hem. 

tive ^hioTZl gradual? UP ofT nded *° the de " 

O, “«” «.« of , h ' , ■ ,w «W«. Ti, “ 

“"■“toted thr 0TOh ““ a ” d «»»=. A, , he 9 ‘*’ ««y 


r .!" 7 ° nd ever ‘increasin 


Cut 

«» *™. taTT 7 m «4* 

® e Production 


*££ to-r - G °~ ~ 

**>* c OT .t d * “«« ^o/rrr service **■ - 

“* WMific res ™“ Ce ' * «”»i S tod of a S i,tof7'“ eW » f Eco„ 
S,ndCe - “ “"■Pensive propa °^ dusW »l Pofc, 



Of the 




and inslm 


a=S:SpHS: 2 rs= 

orgonizotioo wilnk P°osiblo. If w er fo promote indu.1,1, 

AiI Production tept" 08 We,i ad PP»d to , ls ” ""WMly 

social-econonil 

”<* « «■* «*£,«» ='"dted by *■*—« s< ^? 

tactom repor , e(J difflc or whet] u» instoo IT^' M °» ttjf 

, “ was instituted and “ indus «a] product- ° r the Senotf 
todtogs. In Chopte; “"““w wore token to “ locaI i ”™lo. 

too village weaving Z f"'' 5 m «am p I e ol Z <KC " d ‘to„ with », 
mad o ty person J ot ZV" Cm,mI J “™ fo» d ”, “? femM 'o to 

» rmMemen, had 0^^°” « too, £“ *""«. 

e workers. Without ri i f °° P re P°nderanf n „ ^ tile baknl. 
a ul business i n the np-l? Ind ustrial Office ^ 100 t0 tile detr ^U|» 

toe unfavorable cucn.ne t ^ Ven « 


Nearly 


32 


every vi "age has 


mOIS 'bazaars" where 


a “ kinds of vill age products 


are tradod 


I his Section also dealt with the larger mechanized industry. In Chapter 
I mentioned the disadvantages often attached to the managing agency 
factory industry. Whenever serious and well-founded complaints about 
fcmditions appeared to exist, the office stepped in in order to change the 
■riancial relations between manufacturer and agent by arbitration, or 
hi establish new and more satisfactory connections. 

In the rapidly growing textile industry, when the large organizations, 
» "i<! with investments of 3 to 4 million guilders in sarong production, 
■pcrienced competition from the small-scale industries, certain financially 
hiwerful concerns tried to wipe out the small-scale industries by price 
•l uthing, although the smaller concerns, as I explained in Chapter II, 
r* re completely competitive and beneficial from a social-economic view- 
fiuiit. In these cases the Government provided for legislation by which 
4 lotal production and a production quota were established, a reasonable 
Id ice was maintained, and the expansion of the textile industry was put 
mi a sound footing. 

The subject of legal regulation of production gives a good illustration 
Ul the intensive manner in which the Netherlands Indies Government 
Htcupied itself with these industrial affairs. 

I In order to keep the market open for domestic textiles, a system of 
Import quotas was set up in such a manner that there would always be 
h market for domestic production. In addition the factories were legally 
found to a licensing system. These licenses indicated the productive 
opacity of the factory, stated in numbers of mechanical or hand looms, 
Wlule stipulations could be added concerning the type of goods to be manu- 
l'i, lured, the wages to be paid, etc. In this way it was possible to guard 
ii'imnst exhausting price wars, against a cartellization of the large factories 
n l he detriment of the smaller ones, against a socially unwarrantable 
division of incomes, etc. In short, the far-reaching intervention of the 
■dVernment in industrial affairs fostered healthy industrial development, 
limieficial for all concerned. The figures given below express better than 
words the rapid development made in this branch of industry when these 
.usures had come into effect. 

Table X 

NUMBER OF LOOMS 


1930 


1935 


Mechanical Looms. 43 

M Handloonis. 533 


400 

4,000 


1940 

6.600 

35,000 


1941 

9,000 

40.000 

33 













,o --- <>*« bronchi 

= establishments, rubber 

The Section of Industrial Policy «„ rolI , . 

Industrial Instruction, issued regular' roportl T With the Secti °« fc 
raw materials and by-products It u l- i °? mQrket prices of ImporL 
the expediency of support in certain' 1’^ T g ° Vernment concern!* 
exemption of import duties on certain ca^Ti ^ mStance b T grantl|| 
other than raw materials, by preferonti I 9 °° dS materials <•«* 
enrment tenders, by guaranteeing^ inZl^l c «TT ** all ° ttin * 3 
o.dmg m the larger industries reguirina ■ uf' by governmen t shat, 
jas also the authority which drafted J Caf>itaL This Set* 

Unties, quotas, etc. and prescribed^*eJLIT ™ concerning imp,,, 

of the managing functions in new factories “ ° Certain U 

nesions. w factories were to be allotted to Ini 

Working in close contact with ♦». * 

government-founded organ for SciendP fT™ ^ Industrial p ohcy, lit, 
the technological and the economic aspect ofT^ 1 ReS6arch studied 
fmdmgs were passed on to the industfief Th Vari ° US industries - * 
four branches: (a) laboratory f or ch ® , ThlS organi zation consisted* 
testing materials; CO central bureau ^Th • I 

economic research. technical research; (d) bureau |« 

r;r of ,he “ -—- **** I 

“ d -*. <*«*, OI Indw 
2. Chemical research for all tho k t 

ment of Economic Affairs, and ^heiT ^ dlViSi ° ns of the Depart, 
ment services. ' h nec essary, f or other Govor#, 

^ n alytical resprn'r , )n f 
-suits of which are 

The laboratory f or test' examinatloft 

general and Indonesian mater^hT^aT^ 7*” ° f materia) « J 
the inspection of materials for the Go^e ^ ^ addition » handl.i 
and commerce. The central bureau for ^ ° S for ind "«"v 

nic ~ —*> - td: 


34 


|tonsibilities of and conditions for establishing branches of industry in 
iI k? Netherlands Indies. In addition to this general work assigned to the 
laboratories and bureaus, they collect the information for technical and 
nconomic improvements. 

Industrial instruction is extremely varied and depends on the scope of the 
Industry, its structure, and the type of plant operated. It deals with the 
election of raw materials and with the manner of using them to the best 
•ul vantage from the point of view of profits, of production costs, and of 
Him quality of the finished product. Technical guidance given by the bureau 
lor technical research is chiefly solicited with regard to the type of plant 
which would be most suitable. Although large scale industrial organiza- 
llons sometimes require technical guidance which their own specialists 
Way not be able to furnish, it is principally the medium-sized and small 
plants which are in need of such advice, especially the newer ones. 

The export industry, insofar as its requirements are cared for by the 
Industrial Department, produces to a large extent raw materials for foreign 
industry. The ever-changing requirements of foreign industry necessitate 
constant modifications of the processing of raw materials from the Indies 
In comply with varying standards of quality and assortment, and in con¬ 
fine lion with special characteristics of the material. Extensive research is 
mii ried on in connection with new applications, and to counteract the 
imo of substitutes to replace their products. The lowering of production 

• outs by adopting cheaper methods, by speeding up the process, etc. was 
not only essential to increase the profits of industries, but to keep them 
MOirig. 

Industry working for domestic consumption was obliged to exert itself 
10 the utmost in order to compete in price and quality with imported 
products which came mostly from old, and thus very advanced, industrial 

• auntries. In this struggle, the instruction service with its section for 
fcronomic-technological research and its laboratories, was at the disposal 

• •I the industrial plants, and technical aid was given wherever necessary. 

A special office—part of the Bureau for Economic Research—in charge 
nl investigating the possibilities of setting up new branches of industry 
Ilf the Netherlands Indies, dates from 1940. Even before that time the need 
Im id been felt for a survey to ascertain whether it would be advisable 
uni beneficial to have certain industries established in the Indies, in 
• miection with the economic and structural expansion of industry as a 
bole. Earlier Ihore had been such investigations occasionally, carried 

• mi by personnel who of necessity had to be detached temporarily from 


35 




of this type Of inve.tfgatolTrloroover^ provS^ “ 
the work over to specialized personnel. ' n ®«ssary to tun 

^randolng 1 °and l B VG t' ° ffiC6S Iaboratorl * 

and were within easy reach of the l en2 ° rg ' could be visited ),| 
very important cottage industry the manufacturers - However, II.. 

units of the factory-industry, in which mduStr y and the smalls 

living, could derive but small profit from Tt. m W ° rkers earn th * 

In order to overcome this difficulty the 
extensive educational service, establishing Vernm6nt instituted a v.„ 
tion offices, a large staff of technical and Q DUmber of consult# 

of traveling vocational teachers. NaluralW T.T lnS " UC,0rS - °” d ° 
the findings of the technical sr,wr 7 . h servic es had access It 
industrial laboratories: a textile institute ^ ™ addition the y l'"- 1 

Bandoeng; a tanning and taSlT T ° * 

station a, Djokjakarta Id n^L ^ ° **“* *»«». 

oto. The instructors asd d ' 

contact with the government industrial * eachers maintained cl<«. 

332 industrial schools giving instruction^ .! 0Catl0nal schooIs - There w« 
Dutch was the medium- 2G hue- , fhe vern acular, and 379 whsi» 

and 48 with instruction in Dutch^a^on Ind ° nesian lan 9ua2 

to the textile institute, the leather tan , u*™ SCh °° ls attac M 

ssr ,or 

se>m to * 

it probably is peculiar to the Indies It is h h ® rS mentioned “ j 
for industrially backward countries The ° f ^ reat important 

chosen from the best Indonesian craft QVellng voccrti °nctl teachers 4 
in Indonesian vocational condition. ThTybaTet ’ P ““ 

and good, simple tools, callina an th 7 j * or two assist, m.i, 

,he «°< *** of work f ° ps md <»•" 

to the boss. Thoy explain ihe ° m ““ 

the craftsmen informed of nr,’em fi , tbe P r °P er materials; lu,«, 

cost prices, teach h^to 1 ^ ^ ^ *> <*«• 

teachers are not white-collar men h ? ° f r ° W materials - etc. Tin*. 

men. They travel around in theh^ n UP bef ° r6 th ® dass ' but w '" k 

techniques themselves, showing whaU ^ demonstr ate the 

owing what can be accomplished with 


36 


I tools and better materials. It is remarkable in how short a time these 
fcichers became the welcome friends of the small-scale workers. They 
| "linn board with them, and sit through the long Indies evenings talking 
■bout conditions as they are and as they could be. These men, with the 
I (Mutructors who do more general work, are the ones who started the new 
■ms of cooperatives which I described as industrial centrals, in Chapter II. 

Aside from the measures mentioned in this chapter, there are three 
•dies appointed by the Government to support industry: 

I First, the "fund for small industries," which grants loans at low interest 
jhftos to small-scale workers for setting up new production. The fund builds 
U|> pioneer industries, which it operates for its own account as long as 
r, HinHe industries still hold many risks. As soon as the difficult initial stage 
M passed, the Indonesian directors are enabled, by paying off the real 
Mine of the plant, to become its owners. 

I Second, the "medium-industry credit," which is an institution giving 
Hixlit to larger enterprises on recommendation of the Section of Indus- 
llol Policy, in cases of oppressive relations with managing agents where 
||1im financial position of an otherwise sound enterprise so demands. Such 
•tdits are also available for the enlargement of smaller factories which 
Hi« well managed and have a place in the general industrial scheme. 

I Finally, the Government has added a sum of 10,000,000 guilders an- 

illy to the budget during recent years, in order to participate in large 
Mustries, which are considered to be of benefit to the community or 
ibi country. 

I All of these activities of the Government were developed in close 

.peration with the industrial leaders and interests of the Netherlands 

■dies. 

Thus the legislative measures for regulating production came into being 

-I a poll was held among the owners and managers of industrial enter- 
|<»ines, and a "Council on Legislation" composed of industrialists had 
Ih.mu heard. Advisory committees were appointed for every branch of 
»♦»• InBtry; they comprise Europeans and Indonesians, representatives of 
l ".j<> and small plants. They can demand' to be heard on every production 
Nuumure. A commission consisting of industrial accountants and bankers 
■ih formed to collaborate with the advisory committees in matters dealing 
llflili "medium industry credits." There was also an Industrial Council 
'• «locide on whether or not the Government should hold shares in and 
fMHit'iote new large industries. This Council was aided by an advisory 
.<1 of which Indonesians, Chinese, and Hollanders wero members. 


37 






The above does not give a complete picture, but it presents an outllm 
of the manner in which industrial development is being fostered. Hi 
cordial cooperation between Government and industrialists, between Eufi 
peans and Indonesians, which came into being appears to be quite a 
important as the greater prosperity which was attained. lust as the indui 


trial development in Western countries gave impetus to great soqM 
development, so the Netherlands Indies' industrial development nurtui- 
greater independence of the Indonesian as a means of his becoming m 
independent citizen. 

Thus the Government has been greatly interested, especially dun- 
the last decade, in the development of cottage and small-scale, as well m 
Western, mechanized industry. Until now these forms have been oMl 
to exist side by side. It is already evident that cottage industry lags behind 
in the progress of development. More and more, the small-scale woiIm# 


is taking over the production of cottage industry. However, as long 0 
farmers have so much free time as they do in the Indies, cottage indualff 
will continue to exist. Nevertheless, cottage industry will tend to decraaH 
as the volume and quality of agricultural products per worker increuHl 
How to increase these is a problem in itself, which in the interest* 
the social-economic balance of Indonesian society continually demomll 
new solutions. However, in many special fields small-scale industry vi/A 
continue for many years to be a cheaper producer than the wtttfl 
organized mechanical factory. So long as there is a great difference U 
tween the wages paid in the Netherlands East Indies and in Wfni«it 
countries a number of products will remain cheaper if they come lr(l 
small little-mechanized factories with low overhead and an elastic wtfl 
scale than products which are manufactured in the large mechaiiH 
factory. Machines, ready-made in Western industrial lands, replace Bn 
ern manual labor. The relation between the productive capacity ol {fe| 
large machine and of slightly mechanized manual labor has until h|| 
determined the form of industrial production in the Netherlands Imll#* 
Thus, large and small industry will consequently be able to continue I) 
existence side by side in the future. 


38 


CHAPTER IV 


FACTORY INDUSTRY 

Chapter II described certain conditions which have developed in 

.chanized industry, and I shall devote this chapter to a description of 

lh« results obtained in the Netherlands Indies. 

In what is called factory industry, manual labor has been replaced to 
•4 qreater or lesser extent by machine work. The rate at which a factory 
II mechanized is dependent on the wages to be paid and on the productive 
L wer of the machine. Until now it has nearly always been found in the 
Netherlands Indies that parts of the production can be made cheaper by 
timid labor than by machines. The extent of mechanization possible is an 
iHlthmetical problem in each individual case. As wages go up, and this 

in taking place, continued mechanization becomes more expedient. How- 
»vor, a large factory in the Indies, built along American lines, after oper- 
Utlng for some years, began "de-mechanizing" certain parts, since this 
li. id a favorable influence on the cost price. 

Whatever this relation between mechanized and non-mechanized in- 
Litry may be, it is clear that in the Indies a rapid development of factory 
industry is taking place. The index figures in Tables I and II show this 
.Imirly, as do the statistical data, only partially published thus far, 1 which 
h,tvo been assembled for 1939, covering 25 branches of industry with 
I VlH factories and 172,368 employees, and for 1940, covering 52 branches 
nl Industry with 5,469 factories and 324,210 employees. 

| The factories investigated all work independent of agricultural or 
mining estates. Thus, the sugar industry is not included, although the 
confectioners are. Tin-smelting factories are not included, but metal- 
immufacturing is. The mineral oil factories are not included but the coconut 
nil factories are, etc. 

The available figures make it possible to give a picture of the indus- 
Mid position attained in 1941. The statistics are too recent to be used to 

I Ii,du»tria in N#dorland«ch IndWi." Vconomlsch Weokb/ad, May 1941. 


39 







demonstrate the development described in Chapter I. However, som* 
comparative figures for 1939 and 1940 have been assembled covering* 
branches of industry, and are given in the following table- 

1 

Table XI 


Type of Industry 


Number of 
Factories 


Number of 
Workers 


Production 
in 1939 


Dec. 31 Doc. 31 
1939 1940 


Dec. 31 
1939 


Doc. 31 
1940 


Canning . 5 

Starch . 220 

Rice Mills .1,040 

Vegetable oil 

and margarine . 105 

Palm Oil . 3 x 

s °aP . 13 

Fireworks . 20 


Rubber articles . 

Sawmills . 

Furniture .. 

Wood barrels 

and cases . 

Other wood products.. 
Printing . 

Tanning .*. 

Weaving . 

Shoes . 

Public electricity . 

Tiles . 

Glass containers . 

Iron castings . 

Tinplate works . 

Stool barrels . 

Agriculture 

machinery . 

Repair shops 
machinery . 

Hopalr shops 
oloctrical . 


Shipbuilding 
and repair 


Wagon building 


Automobiles, repair 
and assembly . 


11 

105 

10 

19 
10 

268 

20 
131 

12 

115 

14 

5 

5 

28 

5 

61 

213 

10 

12 

23 

27 


Totals .2.538 


40 


6 

226 

315 

988,000 kgs. 

220 

13,872 

7,566 

187,138 tons 

1,137 

26,618 

28,560 

1,114,825 tons 

113 

6.788 

7,107 

202,530 tons 

31 

5,102 

3,950 

298,290 tons 

14 

1,743 

1,864 

15,307 tons 

21 

3,699 

1,936 

1,256 

billion pcs. 

14 

1,403 

3,371 

858 tons 

103 

5,183 

3,957 

130,032 tons 

12 

397 

813 

436 tons 

27 

1,963 

2,147 

2,229,000 pcs. 

9 

206 

166 

773 tons 

284 

14,309 

15,162 

16,227 tons 

25 

1,302 

1,293 

594,000 hides 

200 

37,342 

50,168 

36,618,000 meters 

10 

1,329 

2,519 

610,000 pairs 

126 

8,407 

9,274 

325,200,000 kWh 

21 

1,702 

2,497 

18,700,000 pcs. 

6 

829 

1,617 

3,455,000 pcs. 

5 

439 

392 

3,118 tons 

28 

1,497 

1,705 

21,300,000 tins 

6 

251 

463 

479,000 pcs. 

68 

9,005 

10,559 

14,691 tons 

282 

13,726 

17,812 

1,279 
tons steel 

163 

606 

1,569 

385.7 

tons metal 

16 

4,303 

7,268 

4,037 

tons metal 

23 

6,993 

5,895 

5,537 

tons metal 

40 

1,228 

3,346 

38 

tons metal 

3,010 

170,468 

193,291 



Production 
in 1940 


1,418,000 kg* 
223,742 tom 
1,202,826 tons 

220,538 tom 
236,651 tom 
16,588 tom 
739 

billion I** 
2,200 tom 
118,917 too# . 
943 tom 


2,605 

18 

1,185, 

81,823, 

3,196 

969,600, 

28,420 

17,674, 

3 

31,500, 

589 


,000 pen 
231 tout 

: ,000 tons 
(appisy 

,000 him* 
,000 muMf 
,000 puli# 
1,000 kWh 

,000 pm 
,000 p< n 
,000 tom 

(cip|its|| 

,000 tin# 
,000 pc* 


30,062 tom 



Thus, in 1940 nearly 500 new factories were established in these 
I branches alone, engaging no less than 23,000 workmen. The total number 
; nl mechanized factories was about 4,800 in 1935, and in 1939 had grown 
I In about 6,100. If the development of 1939-1940 (unfortunately the only 
I yrars for which we have reliable figures available) is taken as a basis, 
I II may be concluded that fully 55,000 workmen are assimilated yearly into 
Ipactory industry. 

Chapter III explains what was being done, both in vocational schools 
mid by traveling teachers, to train skilled labor. It must be considered 
I lhat it was also necessary to train more and more teachers, as well as 
■u great number of surveyors. The tremendous educational task at that 
■time could not be managed by the government alone. Private initiative 
I l»« id to step in, and took over several branches of instruction. At the same 
nine a strong movement of workers took place from small-scale to factory 
■ Industry. In each locality where a shortage of workers developed—this 
shortage was becoming acute in the last few years, especially in the 
I imdile and in the shipbuilding and repair yards—local training schools 
■wore set up, where, in turn, the recruiting of teaching personnel caused 
I many headaches. 

Table XI listed the factories which appeared in the census of 1939. In 
11140 this number grew to 5,469. Grouped by industries, the picture, accord¬ 
ing to the census at the end of 1940, was as follows: 


Table XII 


Factories Factories Number Average per 

l»ii|»!Htry on Java other Islands of workers Factory 


Bftdstuffs . 1002 

leverages . 177 

Mmicco . 115 

v*<i oil, margarine, etc. . 824 

• Hlmicals . 61 

Rubber articles . 10 

WimmI products . 81 

hinting, binding, etc. 251 

THtming . 23 

i ullle . 231 

i Intliing, shoes . 24 

ftmi and electric. 518 

hlilhonware, glass . 100 

M*lal . 34 

Repair shops and shipbuilding. 476 

TOTAL . 3.927 


605 

43,068 (a) 

27 

163 

5,005 

21 

2 

53,547 

464 

254 

21,850 (a) 

20 

11 

6,038 

82 

4 

3,371 

240 

70 

7,083 

52 

59 

15,842 

51 

2 

1,583 

63 

8 

50,168 (a) 

210 

1 

7,624 

30 

212 

11,232 

154 

23 

12,371 

102 

12 

3,710 

81 

116 

46,449 

78 

1,542 

324,210 

59 


(cl) Not comploln Not available from certain branches. The total is therefore greater than these 
|l <>u**d would Indicate* 


41 








































































The total value of wages in these industries is incomplete and thera 
fore cannot be accurately presented. First we may note that 70% of tht 
factories are in lava. Also, the factories are not large—the figures covering 
the number of men employed show this. This spread of work over many 
smaller factories, which are also geographically distant from each othor, 
is naturally beneficial from a socio-economic viewpoint. The form of 
Java, a very long, narrow island, and the nature and origin of the industry, 
lead to this. This tendency was further strengthened by the former hi« |l» 
cost of transportation by land and sea. While it is true that this cost hell 
been lowered considerably in recent years, still as a result of vestml 
interests in railways, and Western-organized steamship lines, it continual 
to be too high to make a concentration of industry advantageous. To giv« 
an idea of the difference in transport costs, the average freight rate Irt 
Java is from 3.5 to 7 Dutch cents (approximately 2 to 4 U. S. cents) })«•» 
long ton, while in the United States the average rate is about 1 U. S. com! 

In Table XIII, given below, are grouped the more important statistic! 
bearing on conditions in the industries given in the previous tables. 


Table XIII 

POWER AND FUEL CONSUMED IN FACTORIES LISTED IN TABLE XII 
(Except 471 repair shops, for which no figures are available) 


No. of Motors. 

No. of Mechanized machines. 

Hard Coal used (tons). 

Oil Used (tons). 

Gasoline (1000 liters). 

Firewood (1000 cubic meters), 

Gas (1000 cubic meters). 

Electricity (K. W. hours). 

Lubricating oil (1000 kgs.). 


25,818 

55,970 

93,920 

72,075 

1,124 

886,414 

23,256 

94,996 

2,589 


Figured in k.V.A. (kilo-volt-ctmperes), the average motor was of | 
k.V.A., while the average for each factory was 64 k.V.A. About 7,4(1 
Europeans and 18,889 Chinese were employed in the factories. There w* *|# 
about 24% women among the workers, preponderately in the tobci<<fl| 
factories (39%) and in the textile industry (34%). The ratio between um 
aging personnel, minor supervisory personnel and laborers was 1.6%, • 
and 92.4% respectively. While the complete totals of wages and salaries p«U| 


42 


nre not known, the total for 1940 covering a large percentage of the fac¬ 
tories employing about 146,000 workers is known, so that we can make 
(i rough estimate of the wages per worker. Assuming that the increase 
In 1940 was the same, the average number of workers can be estimated, 
mid on the basis of this, an average yearly wage can be arrived at, 
which would, perhaps, be somewhat on the low side. 


Table XIV 

YEARLY INCOME OF INDUSTRIAL WORKERS 


Wages pei 

Estimated year per 

No. workers average Wages in worker 

Groups Jan. 1, 1941 in 1940 1000 gldrs. in gldrs. 


I Preserves, starch, ricemills, foodstuffs. 


soft drinks, veg. oil and margarine. 

40,918 

38,000 

7,665 

202 

II Alcohol, ice, gas, soap, shoes. 

7,665 

7,120 

2,149 

302 

Ill, Rubber, woodwork . 

19,797 

18,420 

4,461 

242 

i V Dyes, chemical, zincographic, limestone 

20,108 

18,690 

6,524 

349 

V Iron, steel, press work, repair and 
other metal constructions. 

58,283 

54,600 

22,734 

416 

TOTAL . 

146,771 

136,830 

43,533 

318 


In estimating the value of these wages, the purchasing power of the 
guilder must be taken into account. These figures cover a period of great 
industrial expansion, so that a large number of apprentices must be 

• minted among the number of workers. Their exact number is not known, 
l>ut it would be safe to assume that 10 to 15% were boys and girls younger 
I Kan 15 years of age. 2 

It is not known how many of these young people work in the family 
»ircle. We have seen that in the industries studied, 24% of the workers 
nm women. Thus it is certain that the average income per family is con¬ 
siderably higher than that given for individual workers in the industries 
Munitioned in the table. 

In addition to the amount of wages paid, it is of special economic 
significance to consider what portion of the raw materials for industry 
••m be supplied by the land itself. Surveys of this have been prepared 
!>y the Industrial Service in the Indies. In 1940 the resulting figures for 
llitt branches of industry covered were as follows: 

’ In 1930 In lli« t! A tlioia wore* 49 million gainfully employed, of whom 11 million were women, 
4) nut 0,7 million w»«*» under I*• y*ur» of age. 












































Table XV 

COST PRICE FACTORS IN PERCENT OF GROSS VALUE, IN 1940 


Kind of production 

Gross value 
of production Wages 

Raw 

Materials or 
constituent 
products 
produced 
in N.E.I. 

Ditto 

imported 

Balance 

Not J 
Nation® 
inconti 

Preserves . 

. 100 

13.2 

25.6 

26.7 

34.5 

55.5 ] 

Soap . 

. 100 

10.8 

37.5 

15.7 

36 

54 i 

Rubber goods . 

. 100 

29.7 

22.7 

19.8 

27.8 

67 

Sawmills . 

. 100 

16 

59 

3.6 

21.4 

70 

Printing . 

. 100 

39 

8.5 

31.5 

21 

45 

Steel construction and repair. 

. 100 

23 

7.5 

33 

36.5 

38.5 

Tanneries . 

. 100 

11 

57,5 

3 

28.5 

78 

Tile, bricks . 

. 100 

37 

36 

2 

25 

82 

Biscuits . 

. 100 

15.6 

23.3 

48 

13.1 

36 

Weaving . 

. 100 

20 

7.7 

52 

20.3 

31 , 

Confectioneries . 

. 100 

8.2 

26.5 

9.8 

55.5 

33 

Margarine . 

. 100 

7.4 

64 

5.5 

23.1 

72 

Paint . 

. 100 

6.5 

6 

62 

25.5 

121 

Weighted average in N.E.I. 

. 100 

22 

17.7 

33 

27.3 

ahmit 

55l| 


Average, secondary industry in 

Australia . 100 20.1 59.3 20.6 


Using the average figures for Australian secondary industry for conv 
parison, it appears that the "balance" figure for the Indies is perceptibly 
higher than that for Australia, a country which also had to import Ml 
machinery from abroad until very recently, although its industrial devolopn 
ment took place much sooner. The comparison shows that Netherldmln 
Indies industry apparently has passed the difficult age, while industrialiwt*» 
still profit from the advantages of the early start. 

In figuring the cost price components, the Industrial Service at tin 
same time made a calculation of the direct national income derived flow 
various industries. By this is understood the total of incomes from wutjtl 
and obtained from native raw materials, insofar as these were unu*«4 
before the industry was established (for example: clay in the tile <jih| 
brick industry; sand in the glass industry), and from the profits mado by 
the entrepreneur. Thus, dividends and interest are not included, nor me 
incomes obtained from the importation of machinery and raw materlMl* 
repairs and maintenance of equipment and buildings, etc. The actual tolnl 
national income is, therefore, certainly substantially higher. 

These figures are of the greatest importance in estimating the vtiltM) 


44 


of an industry in a setting like the Netherlands Indies. The Government has 
always strived to obtain only such industries which logically fitted into 
the economic system of the country. In this—except in a few very special 
cases where defense interests were at stake—there was never any attempt 
at autarky. The legal regulations even give the right to prohibit the 
establishment of certain branches of industry, and to set a ceiling on 
production. This control over the component parts of industry made it 
possible to decide whether limitations should be placed, and if so, to 
what extent, in order to achieve the greatest benefit for future develop¬ 
ment. These data are of the greatest importance for the Office of Industrial 
Policy. 

From the data in tables XI and XII, it is clear that the industry of the 
Indies is growing into a consumer goods industry, chiefly for domestic use. 
This was natural and it is probable that this tendency will long persist. 
If this development is guided along such lines that in general only those 
articles are manufactured which cost less effort than the producing of 
raw materials with the same trade value, then it will lead to perceptibly 
rjreater prosperity, while at the same time, a wide market will remain 
open for imported commodities and capital goods. 3 For this future develop¬ 
ment there are many favorable natural factors. 

In Java there are still 76,000 horsepower (in units of more than 2000 
horsepower) of undeveloped water power available; besides this amount 
there are a lot of smaller sources, the total volume of which is not known. 
Thus Java is not rich in this resource, but the presence of oilfields makes 
ll possible to use natural gas and cheap oil for power also. In addition, 
coal as a source of energy can be obtained in any quantity from the 
Outer Islands. 

There are other important sources of water power in the Outer 
Inlands. Insofar as these have been observed, one has been found of 
063,000 horsepower at the Asahan River in North Sumatra; this has been 
harnessed and is to be used for the aluminum industry; in Celebes, near 
i arona, there is available water power of 180,000 horsepower; near Posis, 
V‘20,000; near Tonado, 64,000; and Naen, 16,000. These sources of power, 

• •I which the first mentioned is near a bauxite deposit, and the latter 
i mar iron and nickel deposits, can and will be of great value in the future. 

The development of electric power has made rapid strides in recent 
yoars. The last ten years have seen the harnessed energy doubled, and 
In the last twenty years it has become thirty times greater. At present 

3. Soa Cluiptfti V. 


4!i 





























550,000 horsepower are harnessed in generators of more than 25 k.w„ 
while 3,400,000 horsepower of water power in sources greater than 5011 
horsepower are known to be available. The future industrial developmoul 
will be well able to use this. Water power has been expensive to hamoM 
in lava; the large sources in the Outer Islands have been much cheap* 
to use. The price per k.w. hour on Java, taken from public utility figuron, 
varies for industrial use from 2.5 to 6 Dutch cents (1.4 to 3.3. U. S. cento), 
The cost price in great power plants in the outer islands is probably 
between 2 and 5 Dutch cents (1 and 2.8 U. S. cents) per k.w. hour. 

The tropical climate, especially on lava, is generally moderate, ami 
by a good selection of location one can secure advantages in temperatm* 
and humidity. Actually, with modern air conditioning, the factor of clinvito 
has become less important, although in the Netherlands Indies it cannot 
always be considered as favorable. The great daily variation in humidity 
which fluctuates on an average from 48% to 86% is a handicap for mcmy 
branches of industry. 

The Javanese is a good worker, although his short stature 4 and li<|M 
build make him less suitable for heavy work. A repetitious operation 
when no great feat of strength is involved, suits him very well, and lito 
performance, after a short period of training, is in that case as good <t| 
that of a European workman. As the work gets heavier, his performani’l 
rapidly declines. Thus the Javanese is an efficient worker in the texllli 
and cigarette industries; a workman with great possibilities in the mam' 
facture of bicycle tires, but not so good for automobile tires. He is alt# 
very inventive; this quality finds opportunity for expression in small-wito 
industry. 

Much was said formerly about the great drawback of absentootol| 
among the Indonesian workers, but this appears to have been exaggerate!, 
although it seems probable that absenteeism is somewhat higher hoi« m 
mechanized industry than it is in similar factories in Europe. In the 
spinning mill, established in lava in 1937, absenteeism—exclusive of Jtl# 
ness or accidents—was only 3% in 1940. Within two years this factory Util 
attained a productivity per worker equal to that of an average puuj| 
spinning mill. 

In the years when industry was growing so rapidly, greater inlm«i! 
in the trade union movement developed among the workers, although 
movement did not advance beyond the primitive stage. In 1935 there whip 

4. Tho Javanese weavers' choice of Japanese looms was partly duo to the fact that them- I" *1 
are built 6 inchos lower. 


Ill trade unions with 72,675 members; in 1939 there were 75 with 109,547 
members. Thus there was growth and concentration. In 1939 there were 
18 strikes of from 1 to 12 days, involving a total of 1,628 workmen. The 
motives were wage disputes or unjust treatment of one or more workmen 
by the overseers. 

There are other factors in the development potentialities of mechanized 
industry. Thus far a typical industry of consumer goods has developed, 
npread over the whole territory in comparatively small units. Many of 
these factories use quantities of raw materials and semi-finished goods 
which it will certainly be possible to produce in the Indies. In general such 
nemi-raw materials are only advantageously handled in large quantities. 
Since the export of such products is nearly always impossible, the domestic 
consumption must be built up in order to undertake manufacture thereof. 
The use of various producers' goods has slowly increased to such an 
extent that new possibilities developed. Thus the use of cotton thread for 
weaving grew from 3,000 tons in 1930 to 28,000 tons in 1940; 5 consequently 
nizable spinning mills could be built. Owing to a sharp increase in the 
noap industry, the consumption of caustic soda during the same period 
Increased from 4,000 tons to 18,000 tons per year. 6 As a consequence of 
ilie developing mechanization and expansion of repair and construction 
( hops and shipyards, 50,000 tons of scrap steel became available yearly. 7 
The use of various chemical products has grown from about 300,000 to 
h()0,000 tons since 1934. 8 

This growing consumption of various materials stimulated the estab- 
linhment of many factories in the Indies; however, entrepreneurs had a 
justifiable fear of taking on these factories which demanded so much 

• upital, and which, without exception, required a rather large concentra- 
llon of production. 

Freight rates by land and sea are high in the Indies. The hesitation 

• >ii the part of entrepreneurs was overcome when the Government itself 
"dually began to work on the problem and a series of large factories 
*ould be undertaken simultaneously. It was calculated that a private 
••Kjanization set up jointly by a number of factories for sea transportation 
1/ small motor ships to bring in the raw materials and take away the 
imished products would lower shipping costs to nearly 35 per cent. When 

’• s JP?, nn,n 4 7 Tegol is in operation; in Semarang, Koedoos and Paioorooan, mills aro 

Mn«j built. Altogether, 160,000 spindles. 

(». A soda factory with a capacity of 15,000 tons caustic soda and 15,000 tons feitlll*..ui wan in 
ti»**i'uration. 

/• ml11 w,,,, "I"'" Ixxiilh furnaces and a simplo rolling and hnmmoi mill w<im lining plmnuul 

11141 for 11ir* pio. miHln., of 41),000 tons of scrap. 

U. A chemical pi.ml wllli a capacity- of about 65,000 ton* wa* being built nl TJtpoe 


47 

















this was proved, five projects for fundamental industries were begun 
within a year. 

There is still considerable difficulty in the Indies in obtaining well 
trained managing personnel. Since industrialization is still in its infancy, 
specialized personnel for organization and management is not yet avail 
able locally. This personnel has to be imported or trained. For small-scalo 
and smaller mechanized industry a training system has been organized. 
In effect, more and more Indonesians with theoretical training are bo 
coming available as the University of Bandoeng trains civil, mechanical, 
electro-technical and chemical engineers. But these young people lad 
the experience necessary to build up and operate industrial enterprise 
independently. The structure of the overseas factory has solved thin 
problem. 

Finally, the question of whether or not raw materials are availabla 
locally is of the greatest importance. There is neither cotton nor wool 
in the Indies. While there have been extensive experimental plantings of 
cotton, they have not given very encouraging results thus far. It is not 
likely that large cotton plantations can be developed. The climate of Java 
is, in general, too humid; furthermore the available agricultural acrecnjti 
must be used for food crops. Cotton cultivation always requires extensivi 
areas. Possibly, a limited opportunity for cotton planting exists on soma 
of the smaller islands east of Java. It will remain necessary to impoil 
cotton for the textile industry. 

There are many possibilities for industries using agricultural product^ 
wood, fibers, rubber, tapioca, vegetable oils, hides, sand, clay and limfl 
stone. For the whole metal industry, which until now has been using 
300,000 tons of imported metal per year, even more metal in all form* 
will have to be imported. 


CHAPTER V 


CONCLUSION 

What course will the development of the Netherlands Indies' industry 
lake in the future? To answer this question, it is desirable to consider 
further the industrial possibilities in the economic life there. 

Industry in the Indies in its first phase developed in two directions— 
(»ii the one hand as village commodity production, and on the other as an 
adjunct to the large estates. A comparatively important small-scale in¬ 
dustry producing consumer goods for the local market grew out of the 
village industry when the people's purchasing power from agriculture 
increased. 

In the meantime, education and travel had stimulated the desire for 
more commodities, so that the Indonesian villages were a ready market 
l'ir all sorts of new products. At the same time the Indonesian community 
was progressing; men with ability went into the factories not only as 
l-iborers, but also as managing partners. Production centrals in many forms 

• ind variations were taking the place of obsolete economic forms. The 
Western entrepreneur, who in many cases took the initiative in production 
which was comparatively difficult from a technological viewpoint, was 
i Kissing on his knowledge and experience to the Indonesian. Consequently, 
Hie Western entrepreneur always had to go on to even more difficult 
I'tocesses. Thus industrial growth was speeded up. 

The impulse to industrial development in this second phase came 
iiom the higher incomes obtained in primary production: agriculture, 

• Mining, fishing, cattle raising, etc. This developed a typical production of 
consumer goods, in both small and factory industry. 

In primary production considerable agricultural and mining industries 
!•• id already coino into being. These, however, largely served the oxport 
ihmIo. The moil important ol them are given in the following table. 


4 !) 














Table XVI 

AGRICULTURE AND MINING FACTORIES 


Type of Industry 

Number of 
Factoriou 

Production 

1939 

ApproximuU 
Percentai|« 
used for Honii 
ConsumpliMii 

Sugar factories . 

Rice mills . 


1.500,000 long tons 
1,200,000 

120,881 

421,000 

223,000 

108,000 

120,000 

250,000 

263,178 

5,193 

18,000 

118,000 cubic meters 
200 long tons 
7,036,348 

14,000 

160,000 

25 

Tea factories . 


90 

Rubber remilling factories 

Tapioca factories . 


30 

3 

Fibre factories. 


37 

Coffee hulling factories 

Palm oil factories . 


0 

50 

Vegetable oil factories .. 

Etheric oil factories 


10 

70 

Kapok cleaning . 


5 

Sawmills . 


0 

Quinine factories . 


90 

Petroleum refineries .... 


10 

Tin refineries . 


18 

Saltponds and refineries 


1 

100 


In addition to the factory production mentioned in the above tabl*, 
there is an important production of similar goods among the fannoi. 

emselves, both in cottage and small-scale industry. For instance, besulo, 
he factory sugar production, there is a production of native sugar, bo] 
from cane and from some species of palm. There is an extensive taplj 
production for home use, as well as an equally extensive production 
vegetable oils, especially coconut oil, for home use. 

Aside from rice mills, coconut oil factories-which are included unci... 
vegetable oil factories,-sawmills, saltponds and refineries, the agricJLijt 

hade" 11111115 “ TaWe XVI are ^sentially servants to the ex,. 


e products which often undergo an intensive technological proc#J 

mg m the Indies could, in many cases, be processed even further so I. 

here will undoubtedly be an expansion of the finishing industry. In I 
general, this type of industry will remain limited to the standardization ..! 
products unless further processing offers definite economic advantage 

Besides the export of about 14,000 tons of tin, approximately 25,000 .. 

ons of tin ore are exported; in addition to 200,000 kilograms of quintn# 
approximately 7,000,000 kilograms of cinchona-bark are exported. In oM- 
50 


lo save shipping space, complete processing of tin and quinine will un¬ 
doubtedly take place locally in the future. 

Furthermore, the future will probably see a further standardizing of 
lubber 1 through a suitable factory process of preparation. The growing 
demand for tapioca as paste and as starch has already made several 
udditional processes necessary in that industry. It is difficult to say, 
however, in what direction these processing industries will develop. This 
will depend on the actual requirements of consuming countries for the 
product, and on their future requirements, brought about by further indus- 
hial developments in those countries. Insofar as it is possible to foresee 
l his, there are no great potentialities here. More may be expected from 
the processing of various industrial by-products which are at present 
thrown away, and of raw materials which are now being exported with¬ 
out any refining. In the Indies, for instance, the bagasse from the sugar 
industry is still used as fuel, although this by-product is good raw material 
lor the manufacture of wall-boards, paper and rayon. The residues and 
molasses from this industry are only used to a limited extent for alcohol, 
hut for the most part exported-not less than 200,000 tons annually. This 
hy-product would be good material for the manufacture of yeast and 
vitamins. In the rice mills, mountains of bran are burned; in the tea fac¬ 
tories much ordinary leaf tea and tea dust are lost; in the fibre factories 
Mome of the material is considered worthless and is thrown away; in 
kapok cleaning a great quantity of kapok hearts remain unused, etc. 
The research organizations mentioned in Chapter III are all seeking prac¬ 
tical means of processing such by-products to good advantage. 

Nevertheless, the above offer only a limited field for industrial expan¬ 
sion; the raw materials which are exported in natural form or but slightly 
processed offer greater opportunities. The principal products in this 
category are: hides of which approximately 7,000 metric tons are ex¬ 
ported annually, resins and gums 32,000 metric tons, tanbark, 18,000 
metric tons, and bauxite, 300,000 metric tons. Plans have recently been 
'ompleted for the manufacture of aluminum from bauxite. Making hides 
Into leather, also for export, was growing steadily, and can undoubtedly 
I"' expanded still further. At the same time the extraction of tannin from 
harks will be considered; this production will become greator each year 

• ►wing to intelligent reforestation. A technological process wan worked 
nut for refining resins and gums, by which a standard produrl could be 

1. For example, rubber technology may develop projoctn whereby lah>». ih» li.jui.l . .1 Ml ),|„.i, 

* 11 play a role, and from this wo cbn expect other procomtliigN hi th« N»lh»il.imln 


hi 











































offered oa the market, and a pilot plant was being built. But, here again, 
all these processing industries will only make possible a limited indul* 
trial expension. 

It is possible that nickel production from the rather extensive nickll 
fields in Celebes may form a worthy trio with tin and aluminum pm 
duction. But since the consuming territory is elsewhere, the further pm 
cessing of nickel will probably take place elsewhere. While antimony< 
molybdenum, mercury, tantalum, columbium, titanite, bismuth, magne.*ui«> 
dolomite and other ores also occur in the Indies, so far as is known, tlioy 
are not found in rich deposits or in important quantities. Good clay, whl« h 
has been sought for years for the pottery industry, has not been found. 

The ladies do not possess good quality iron and coal necessary la| 
developing heavy industry with accompanying machine industry <uw 
extensive shipbuilding. The iron ore found is poor so that refining is dttff 
cult. The available coal is soft and poor-burning. In this respect also tht 
industrial possibilities of the Indies are limited. 

Better, even great, possibilities exist in the clearing of forests and lli« 
manufacture of wood products. In the field of turpentine and resin diMtlll 
ing, and of wood pulp, paper and synthetic silk, the natural resource# ••! 
the Indies offer many opportunities. The reasons why these opportunist 
have not been utilized heretofore are principally the excessive co*i 
transport and also the extremely varied types of wood in the forai»||, 
Through reforestation work over scores of years, however, new condilinM# 
have been created; transportation costs have also been lowered, so tlttli 
in the near future industrial expansion in this field will be possible. 

The fishing industry also offers a few, though very limited, indu*hiMl 
possibilities. The seas round and between the islands of the archipolciqif 
are in general not rich in fish, and the kinds which are caught do nut 
justify any hope that a great canning industry, like the American 01 tiff 
Japanese, could be organized. (The fish production for 1940 was 
300,000 tons of fresh fish.) The fish-salting and other preserving fact mill 
for domestic consumption could be slightly enlarged. 

Fruit canning also offers only a limited possibility of expansion lit 
th© provision industry. The fruits grown in the Indies are generally «»l 0 
different quality, apt to deteriorate more rapidly than those grown tu 
temperate zones, so that the canning business, at least for the pinfumlj 
offers but small chance for expansion. There is quite a large potoiill<ilUf 
in the field of soft drinks, but this would bo only for domestic consumptw*# 

52 


und would not materialize until the purchasing power of the masses could 
|*ormit it. 

Cattle raising in the Indies does not offer a basis for important indus¬ 
trial expansion. The native cattle are principally draft animals, and 
unsuitable for dairy products. Pastures were unknown. Fertilizing the rice 
holds is done by irrigation, not by manure, and therefore it was not 
necessary to keep livestock as in European agricultural countries, like 
Holland and Denmark. With the importation of dairy cattle an attempt 
was made to meet the comparatively small demands for milk, butter and 
, heese. At first an endeavor was made to cross these animals with British 
Indian cattle, but the results were disappointing. Better results were ob- 
Ifljned with Dutch and Australian cattle, principally in the mountains. It 
[)• clear, however, that with a total of about 130 heads of cattle per 1,000 
i inhabitants, nearly all for slaughtering or for draft purposes in agricul- 
ime—horses are not used in agriculture—and with less than four milch 
lows , 2 per 10,000 inhabitants, there is hardly a basis for industrial develop¬ 
ment. Since land given over to grain produces six to seven times as 
HUtch food energy as the equivalent land used for dairy cows, the dense 
I population of Java made cattle raising for dairy purposes practically 
I impossible. 

There are not many minerals. Oil production is about 3% of the world 
I total; the coal yield, about 2,000,000 tons a year, will burn, but cannot 
I |w made into coke. Tin and bauxite are important, but only the latter ore 
wim support an industry of consumer goods. For the time being, tin will 
i hi i ire to remain an export article since the quality of the available iron 
■iii' and coal makes it impossible to set up blast furnaces with rolling mills 
I which would be necessary for a tin plate industry. The primary wealth 
lit the Indies lies in the extensive and good agricultural lands and in the 
Kill 000,000 people whom we have learned to know as excellent workers. 
| ncause of these factors it was possible to secure enough food for them, 
|i,„| to develop an extensive production of agricultural raw materials, in 
Imisequence of which the Indies became important in world trade. 

It is quite remarkable that agricultural export products are nearly 
I nil obtained from plants brought to the Indies, from other parts of the 
l.'ild. Rubber, coffee, tobacco, tapioca, quinine-these are immigrants from 
I'tith America and Africa. The tea bush came from China and British 
India, and oil palm from Africa, etc. With perseverance and Industry 
lliime cultures have boon developed and improved. The earnings from 

Two tlili«I** •• ♦ m»iI* l» t own aonio lrom Australia or from Holland 


VI 










these sources have yielded rich profits for the entrepreneurs, 3 but aim 
as a consequence thereof it was possible to build excellent highways, aft 
extensive system of railways and irrigation works, and to make education 
and health services available. And not only is capital formed by thnn» 
activities to further expand the work of the entrepreneur, but also invnut 
ments are being made by and for the Indonesian population. Here fomi 
dations were laid for a further and more rapid progress of prosperity. 

In the meantime, the Indonesian people have grown mature for un 
intensive cooperation in the future building up of prosperity. One of llm 
means of reaching this will undoubtedly be industrial production of co# 
sumer goods organized on a wide scale. This production will certainly 
not be for the local market only. The position of the Netherlands M i... 
with its 70,000,000 workers and consumers, and therefore with the posml.ll 
ity of a large domestic market, certainly facilitates the finding of mar liol* 
in British India, in Thailand, Indo-China, Malaya, etc. A number of articlaft 
were already being sold to those countries. 

In many places this study has shown that agricultural production It 
the starting point for prosperity in the Indonesian community. For a lulnit 
development, the great wealth of fertile land, including the still Ln«» 
ploited territories in the Outer Islands, the favorable climatic concjflofti 
the situation of the archipelago on many sea lanes, and the fact ilo.i 
among the 70,000,000 consumers some 62% are agricultural workers, nnmt 
continue to be the basis of any government desirous of stimulating pi..* 
perity. 

The farmer's purchasing power must first be increased, otherwisn llt| 
volume of consumption would remain too small. In Chapter II are detallm 
various measures of domestic policy which were applied and which boijAft 

to show marked results in the years between 1935 and 1939. Tho .. 

results of these measures were good in spite of the increasingly unlay#! 
able rate of exchange during the last ten years between our raw matmlftM 
and the imported commodities, which counteracted this developing 
The index figures in Table I show this clearly. Tables covering a loiiyuf 
period would demonstrate it even more clearly. In 1913 an Indoiie*ln» 
rubber planter could get a sewing machine in exchange for 40 pound.. ..! 
rubber; in 1939 he had to give 240 pounds. 4 A tin of imported suliimft 
could be obtained by the Indonesian farmer for two pounds of copm In 


ico nrfn l nnn We ®* am ino the siims paid out of tho Indies from 1935 to 1939 wo so© that an .ivui 
byoulsW 0 o?s 0 in Vho lidi‘"s dmdend ^ and mlorest lo " ,ho coun,r r> 01 about 4.5% of tho capital lo.a] 

4. In 1932 ho had to pay 520 poundn of rubbor for tho sarao m a chin#. At thin low ooint lnim 
cooporation Bomowhat improvod this impowible ultuation. P ' . 1 

54 


l!)13, but in 1939 it cost him six pounds. In 1913 an Indonesian gum 
collector could obtain a bolt of imported cotton goods for seven pounds of 
tjums, but the same goods cost him no less than 20 pounds of gums in 1939. 

Should the rate of exchange become more and more unfavorable for 
lands producing raw materials, the only solution would be for them to 
attempt to be self-sufficient in the sphere of capital goods and commodities. 
That way, the increase in prosperity will inevitably advance ten times 
more slowly than when raw materials can be produced in abundance and 
exchanged for commodities at a fair rate with the industrial countries 
which need them. Naturally, these commodities must be other than the 
ones which the raw material countries will be able to manufacture them- 
tmlves. Complicated products, and those difficult to make, such as motors, 
lnctory installations, automobiles, airplanes, sewing machines, radios, 
watches, etc., will be the ones which can be imported in ever-increasing 
quantities: it will then be possible for structural steel, cables, tinplate, 
bicycles, hinges and locks, many classes of household articles, etc. to 
miter these lands in a wide stream. Cotton, preserves, dairy products, 
.lyes and paints, etc., can then be bought by the 70 million consumers of 
ihe Netherlands Indies. 

The situation will mean a rapid growth of prosperity for raw material 
.lountries, and thus for the Indies. At the same time, if it is attained gen¬ 
erally, it will stimulate world trade and might become the means of 
mitigating unemployment in the essentially industrial countries, and of 
•naintaining or improving the standard of living in the latter. 

In one of the publications of the Brookings Institution 5 the question is 
•mked, with reference to the United States: "What would be the result 
upon consumer demand if, by some means, poverty could be completely 
. luninated, and if there were very moderate increases of income among 
lb., families in the middle classes?" A similar question can be asked with 
i Inference to the Netherlands Indies: How will the Netherlands Indies 
•t&velop further economically? 

The following table gives, very roughly, the Indonesian income and dis- 
Uirsements, as estimated from data at my disposal: 


Amotlm'B ( iffn' Hy In I'muiuro#, 4th odltion, p. 117. 























Table XVII 

INCOME AND DISBURSEMENT OF INCOME IN 1540 
(in millions of guilders) (see note 3, page 54) 



Workers 
(in millions) 

Income 

Food 

Home 

Furnishings 

Cloth¬ 

ing 

Other 

Commodities 

MmI 

mi*# 

1. Agriculture, cattle 

raising, fisheries .... 

14 (a) 

1,800 

990 

220 

84 

163 

340 

2. Secondary 

production, mining 

3.4 (a) 

650 

257 

98 

49 

87 

1 Ml 

3. Others . 

4.6 (a) 

900 

315 

142 

73 

120 

? Ml 


22 

3,350 

1,562 

460 

206 

370 

751 


(a) Probably 8.4, 2.7 and 2.8 million families, respectively. 


The extent of imports into the Indies and of the gioss production volu* 
of the domestic commodity industry may be estimated as follows: 

Table XVIII 

(In Millions of Guilders) 

Home Olhtt 1 


_Food Furnishings Clothing ComnmJMH 

Imported ... 80 40 130 Mil 

Manufactured .... 250 390 80 3Ml I 


In order to make possible the production and consumption as <|iv«n 
in the tables, the sum of approximately 10 billion guilders, including t<« 
mercial capital, had to be invested in the Indies. 

From 1870 to 1900 incomes in the United States increased as folio wn* 

Table XIX 

GROWTH OF NATIONAL INCOME IN U.S.A. 

Number of Workers Income in HiIIIm«| 

in Millions of Dollar* J 


_ 1870 1900 1870 mini 

Agriculture . 6.90 10.7 1.78 

Manufacturing . 2.72 7.6 1.75 

Others . 2.80 8.7 3.19 

Totals . 12.42 27.0 6.72 


In these years we see a strong industrial development. The mmtliit 
employed in secondary industry grew much more rapidly than tho immi*ai 
of farmers. 

6. Taken and adapted trom tho iigurea In Clark'* The Condition ot Economic Ptoqrnaa. 


56 


Although this development will have a different course in the Nether¬ 
lands Indies, particularly since natural circumstances there are not so 
lavorable as they were in the U. S. A., an increase in consumption and 
production were it to take place in half the tempo of the economic growth 
of the U. S. A. between 1870 and 1900, would influence the figures given 
In Table XVII as follows: 


Table XX 

INCOME AND DISBURSEMENT OF INCOME IN MILLIONS OF GUILDERS 
(Theoretical Situation, twenty years hence) 


Workers Home Other 

in Millions Income Food Furnishings Clothing Commodities Balance 


Agriculture, etc. 17.8 2,770 1,400 360 160 330 520 

hncondary industry . 6.4 1,385 530 220 126 208 301 

Others . 9.4 1,660 630 263 152 250 365 

i Totals . 33.6 5,815 2,560 843 438 788 1,186 


In the above I arbitrarily pre-supposed that the following adjustments 
In disbursements of incomes would have taken place: 


Table XXI 

DISBURSEMENTS OF INCOME 
(Percentages) 

Home Other 

Income Food Furnishings Clothing Commodities Balance 

1940 1960 1940 1960 1940 1960 1940 1960 1940 1960 1940 1960 


Agriculture . 

100 

100 

55 

50 

12.2 

13 

4.7 

5.8 

9 

12 

19.1 

18.8 

fiocondary industry 

100 

100 

39.5 

38 

15 

15.8 

7.5 

9.1 

13.4 

15 

24.6 

22 

fMhers . 

100 

100 

35 

38 

15.8 

15.8 

9.1 

9.1 

13.4 

15 

26.7 

22 


In this very modest tempo of development, we obtain figures from 
which possible imports can be calculated. It may be figured that 750 to 
1.000 million guilders' worth of articles could be imported per year, assum¬ 
ing that the Indies would limit itself exclusively to the manufacture of 
m tides for domestic use. In addition, since the Indies would to a large 
extent have to import the capital necessary for the expansion of production 
•ad consumption, not less than an estimated 1,500 million guilders would 
l"ive to be invested, of which between 700 and 1,000 million guilders would 
go for the importation of machinery. 

Such an investment would certainly prove profitable if foreign couii 
lilos would be willing to pay reasonable prices for Indonesian raw 


57 























































materials and products. The internal situation would then become rein 
tively prosperous, and much more could be done for public health, defenrt 
and education than formerly. Not 40%, but 100% of the youth would thml 
be educated; hundreds of millions of guilders yearly would be availal.l. 

for defense. M 

This hypothetical setup of the future is by no means Utopian. Shoul.l 
anyone in the U. S. in 1870 have predicted the situation attained thero IH 
1900, it would probably have sounded quite as fantastic. The Netherlandi 
Indies have become ready during the last ten years for development IH 
an even faster tempo than the one which I illustrated as a possibility. EvMJ 

year during these years new agricultural centers were being opo.I 

in the Outer Islands; modem industry was developing much faster them I 
thought possible, thanks to directed economy and to the absence of com¬ 
mercial imperialism. With much trouble and difficulty, a life of its own, 

young and strong, has developed in the Indonesian world. In a short .. 

this Indonesian life has taken over various functions, some of them in |m. 
duction. Already 50% of the rubber, 70% of the tapioca, 50% of the colln*, 
and many other export products are handled not by the European estciM 
but by the Indonesian farmer. 

In secondary industry about 25% of the managing positions in ll.* 
factories are already occupied by Indonesians. The overseer groups "•'* 
consist of about 75% Indonesians. More and more the European unmigi.ittl 
is seeing his place taken by the intellectual Indonesian. Thus the basi« ll 
laid for many possibilities which did not formerly exist. The European will 
be spurred to greater effort, to greater science and to greater enterpn- 

If he is incapable of greater effort, then his services as leader boc'.ml 
superfluous. Developments have shown that he is fully aware of thin •■l-l* 
gation. Until as recently as 1930 no ships could be built in the Indies lunjai 
than 500 to 600 tons; in 1940 docks and ways were built for ships of HMNM 
tons. In 1930 the largest piece of steel which could be cast in the Indio* wrt| 
of 1,500 kilograms; in 1940 pieces of 7,500 kilograms could be produced, tl 
this whole development, the experience, science and organizing tal. i - 
the Western entrepreneur continually stimulated more difficult lyi'"" 
production. After a stabilization of technique has taken place, the Indoim-llHI 
more and more rapidly takes over all or part of this production. In Ih* 
manner, through this cooperation between East and West, the wealth ol 
Indies was acquired in the past. Thus Dutch entrepreneurs earned a H-* 

in Indonesian economic life. M 

In the future there will be the same white man's job to be done, ll l» Ih| 


58 


oxample, almost certain that natural rubber will be largely replaced by the 
nynthetic product in industrial countries. A tin substitute is being sought, 
us well as a palm oil substitute for use in the tin plate industry. 

The war has caused the cultivation in South and Central America of 
many Netherlands Indies plants producing raw materials. Through all these 
rhanges, many of the present exports from the Indies will disappear. This 
will undoubtedly be a heavy blow for prosperity, but the Dutch entrepreneur 
mid the Indonesian population have dealt with similar situations before. The 
nynthetic dyestuff industry killed the flourishing indigo production. Synthe¬ 
tic resins drove 70% of Indies' natural gums from the world markets. The 
Increase in sugar production elsewhere made it necessary to stop 50% of 
lava's very efficient sugar industry. 

All these blows have been sustained. At the same time the Dutch started 
mbber production, palm oil production and sisal production, which through 
• ooperation with the Indonesian population, expanded to new and impor¬ 
tant sources of income. The dangers mentioned here can be overcome in 
name similar way; they will be overcome: the Indonesian people, cooperat¬ 
ing with and stimulated by Western experience and science will undoubted¬ 
ly rapidly regain their place in the world when the land shall again be 
lice. Industrial development will play an important role in this. 

In this study I have endeavored to give an idea of the industrial situa¬ 
tion, as it has developed in the Netherlands Indies thus far. Before outlining 
ilie main points of the program for the extensive policy which should be 
(• flowed, we must consider many attempts to industrialization made since 
Ihe first part of this century. 

About 1901, it was stressed in the Netherlands Parliament that prosperity 
in the Indies could only be increased if a secondary industry could be 
•Inveloped. This theory was accepted, and technical experts started their 
•Indies. Many of them submitted reports, which appeared to be widely 
•livergent regarding the potentialities and the policy to be followed. How- 
•wer, there was one unanimous opinion, i.e. that small-scale industry in 
which the Indonesian could do good work, could offer no competition 
M'lainst the greater mechanized industry, where, in the opinion of many, the 
Indonesian worker would not be at his best. 

These confused theories resulted, after many arguments back and forth, 
in Governoi General Idenburg's appointing a commission in 1916 to establish 
I'M’tories, eallml Ibo Commission for Factory Industry. In the opening speech 
Hiln statesman declared that while there was no unanimity of opinion as 
Mnjards ih* 1 i •'••linos, it had been proved that Western organ r/od factor 


59 















ies could manufacture certain commodities more cheaply than they couli 
be imported—therefore, let us see that these factories are established *i« 
soon as possible. This was more or less the order received by the Com 
mission from the Governor General. 

The Commission set to work—it analyzed the manufacture of existimj 
import articles, made suggestions, of which a few proved practicable, <m.l 
was finally dissolved by Governor General D. Fock. 

A paper factory established with Government aid, besides a railrc >< i«| 
carriage factory which was closed down within a short time, and m<my 
projects on paper, was the industrial result of the extensive work perform#! 
by the factory commission. Nevertheless, a basis was laid for future dev«)«*p 
ment. 

Technical experts were brought in to study the projects; industrial mn 
sultants were appointed to make surveys and to give instruction. A pion«wi 
enterprise in the textile line was set up but failed; however, the technb 
personnel which consequently became available formed the basis of till 
Textile Institute at Bandoeng, which later proved so useful. From a simllflf 
pioneer enterprise in the line of ceramics, the Ceramics Laboratory mini 
into being. There were other such examples. 

It is my personal conviction that in these years when there undoubt mil f 
existed a strong and sincere desire to industrialize the Netherlands Indinn in 
order to increase the prosperity of the Indonesians, comparatively I mu 
was achieved only because all attempts were based on transplantlmj 
Western organizing methods to an Indonesian society not prepared for llmfftf 
Too little attention was paid to the basic social structure and the ecdftohm 
conditions in the Netherlands Indies. The setting up of factories such cm ii>* 
Commission had in mind, could only mean the establishment and mcfiuM.ll 
ment of production by Westerners. In that manner the native popu]ull»»H 
could not really participate in further development. 

Meanwhile, new views were born, which all emphasized the poinl 1 U 1 I 
activity on the part of the population itself, even if on a small sea In •!} 
first, should be considered as more important than the establishment lonift# 
of foreign enterprises. Means to this end were considered: expansion » 
more expansion of elementary education; increase of production and coitfl 
quently of the purchasing power of the individual farmer; a rice pnlti'4 
absorption of farmers into small-scale industry which could be operated hi 
and for the Indonesian; development of such small-scale industry by Inwrtf 
freight and power rates, by extensive instruction and, where necessary ! y 
support through financial grants and commercial policy. 

60 




Carrying through these general measures would, according to this view 
which had also been adopted by the Government-develop the possibility 
of important migrations of workers from primary to small-scale secondary 
Industry. This development would bring possibilities for Indonesian leader- 
nhip; this, in turn, would encourage the spontaneous establishment of larger 
onterprises which, not being artificially created, would grow in a sound and 
Btrong manner, while balanced relations could be maintained between local 
production and local consumption, between export production and imports 
Irom other countries. 

The Government has strived resolutely during the past ten years to 
realize the program briefly outlined above. The previous pages set forth as 
objectively as possible all that has been achieved. The results obtained 
demonstrate that the policy followed in these ten years has been efficacious. 


61